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In February 2016, the U.S. Supreme Court made an extraordinary decision. It temporarily suspended the implementation of President Barack Obama’s signature climate change initiative—the Clean Power Plan—which requires coal- and gas-fired power plants, the largest source of U.S. carbon pollution, to cut their emissions for the first time. At the Paris climate talks just two months prior, nearly 200 nations pledged to mitigate their greenhouse gas emissions using a variety of domestic policies. Obama’s plan had become a crucial part of the United States’ strategy for meeting its own commitment in Paris: to reduce greenhouse gas emissions by up to 28 percent by 2025, compared to 2005 levels.
The Supreme Court was widely expected to deny the request for a stay, or a temporary halt, of the Clean Power Plan, which was brought by a group of more than two-dozen states along with a variety of coal industry and other challengers. There was little reason to believe the petitioners merited a stay. They had to show, among other things, that the Clean Power Plan would cause them “irreparable harm” as they waited for a lower court, in this case the D.C. District Court of Appeals, to decide whether to uphold it. The Environmental Protection Agency (EPA) issued the rule under the Clean Air Act, a 1970 law requiring the agency to regulate air pollution, including greenhouse gases. Since the D.C. court had expedited the hearing to June and signaled that it would decide the case soon, likely by the fall, the challengers seemed to face little harm in waiting a few months. The initial compliance deadline under the Clean Power Plan also does not begin until 2022.
In the end, the justices granted the stay. It was the first time the Supreme Court has ever halted a federal regulation before it has been reviewed by any lower court. It issued a brief order staying the rule, and the five justices who voted to do so (Chief Justice Roberts, and Justices Scalia, Kennedy, Thomas, and Alito) did not give their reasons. The court also took the unusual step of imposing the stay not just until the D.C. Circuit Court rules, but until the Supreme Court itself either declines to review the case, or grants review and decides it—assuming an appeal is made to the high court, as is widely expected.
EFFECT OF THE SUPREME COURT STAY
The Supreme Court’s decision suggested that five justices were at least initially skeptical of the Clean Power Plan. But it would be a mistake to over-read the stay as a sign that the court will ultimately strike it down. In the past, courts have issued stays and subsequently upheld the contested rule. In fact, the D.C. Circuit Court recently did precisely that in another case about a controversial EPA rule under the Clean Air Act.
In the Clean Power Plan case, petitioners argue that the EPA may not regulate power plant carbon emissions at all because the plants are already regulated for their toxic emissions under another part of the Clean Air Act. They call the EPA’s carbon rule “double regulation” although it addresses an entirely different type of pollution. Even if the EPA does have the authority to regulate these plant emissions, the petitioners say, any rule must be limited to efficiency upgrades to equipment on site, rather than requiring the larger emissions cuts that are possible by substituting more natural gas for coal, and more renewable energy for both coal and gas. The EPA has taken both of these options into account using a grid-wide approach. Finally, petitioners claim that the rule “commandeers” states in violation of the tenth amendment, by requiring them either to draft their own implementation plans, or accept a federal plan. They accuse the EPA of nothing less than a centralized takeover of state electricity systems.
The government counters that the Clean Air Act requires the EPA to regulate these carbon emissions, and that power plants enjoy no exemption just because they also emit toxics—under the law they must control both kinds of pollution. The EPA defends its authority to set a standard that incorporates the potential to shift to cleaner natural gas and renewables because these options are currently available on an interconnected grid, and are cost-effective ways of cutting carbon pollution while still providing the same amount of electricity to consumers. And the Obama administration fiercely rejects as extravagant the claim that the Clean Power Plan has violated the Constitution—for nearly half a century, environmental laws have given the states the choice to implement federal pollution limits themselves, or step aside and let the EPA do so. The Supreme Court has affirmatively found such schemes to be constitutional.
For now, whether to continue compliance planning is left to the states. Nearly 20 states, including California, Pennsylvania, Virginia, Washington, and most of the northeastern states have said that they will meet the deadline of filing preliminary compliance plans by September 2016—a date chosen intentionally to allow the EPA to issue federal plans, if necessary, before Obama leaves office, but which is now moot because of the stay. Several states, including Kentucky, Texas, and West Virginia, have said they will stop working on preliminary compliance plans. The stay could also push back the deadline for final state plans, now set for 2018, and the start of compliance in 2022. Although it is too early to tell, such delays could translate into a slower draw-down of emissions.
Whether the end result will be a material loss of expected emissions reductions before 2025 or 2030 is unclear. There is no question though that the Supreme Court has introduced uncertainty into the compliance planning process. For one thing, the stay seems, at least temporarily, to have chilled EPA efforts to offer states additional guidance and model plans. Some momentum is bound to be lost until the legal challenge to the Clean Power Plan is resolved. And that process, complicated by the recent death of Justice Antonin Scalia, could take more than two years. The consensus is that the earliest the Supreme Court would decide the case is June 2017, and the latest, June 2018.
IMPLICATIONS FOR THE PARIS AGREEMENT
Although the fight over the Clean Power Plan is domestic, the consequences of the decision will be global. At the 21st climate conference in Paris, 195 countries signed a landmark agreement to limit global temperature increases to “well below” two degrees Celsius, a cap that scientists say if breached, could lead to increasingly extreme weather, drought, and other serious climatic disruptions.These nations made voluntary pledges to mitigate their greenhouse gas emissions through a variety of domestic policies and agreed to revisit these initial targets every five years. For instance, India has pledged to decrease its emissions intensity by 33–35 percent by 2030 compared to 2005 levels, and to ensure that 40 percent of its electricity capacity comes from non-fossil sources by 2030. China has pledged to achieve a peak in carbon dioxide emissions by 2030, with “best efforts” to peak earlier, as well as to produce 20 percent of its energy from low-carbon sources by 2030. And the European Union has pledged to reduce greenhouse gas emissions by at least 40 percent below 1990 levels by 2030, in part, through an emissions trading scheme.
The United States’ pledge to cut emissions by 26 percent below 2005 levels by 2025, and to make “best efforts” to reach 28 percent, relies on a number of domestic measures, not just the Clean Power Plan. These include reducing the use of ozone-damaging hydrofluorocarbons (used in refrigeration, air conditioning, and aerosols); regulating methane from new and existing oil and gas processing facilities; issuing more stringent appliance efficiency standards; and enforcing new vehicle emission standards that are projected to double the fuel efficiency of passenger cars and trucks by 2025.
But by far the most important policy underpinning the U.S. pledge is the Clean Power Plan. Although the U.S. State Department has not specified exactly how much of its pledge relies on the plan, independent estimates suggest that it represents between 30 to 40 percent of the emissions that the government hopes to reduce as part of its international commitment. (There are a number of ways to calculate this estimate, but regardless of the methodology, the Clean Power Plan is an indisputably significant underpinning of the U.S. pledge.) If the Supreme Court strikes down Obama’s plan, Washington would face hard questions about what it proposes to do instead.
The Clean Power Plan is also an important foundation for continued bilateral and multi-lateral climate negotiations. Everyone agrees that further action will be necessary to augment the Paris Agreement, in order to close the gap between the pledges made thus far and the stated goal of preventing a global temperature rise of more than two degrees Celsius. U.S. credibility will be important to driving such efforts forward, and particularly, to sustaining the pivotal U.S. partnership with China.
Since a joint announcement in 2014 that they would lead the international process on climate change together, the United States and China have engaged in what scholar Kelly Sims Gallagher, calls a “virtuous cycle” of domestic policymaking aimed at reducing emissions, which could turn into a “vicious cycle” of mutual default unless U.S. promises pan out. Of course, China could retreat from its commitments anyway, as could other countries—the pledges made in Paris were nonbinding, after all. But it would be unfortunate if, at this early juncture, the Clean Power Plan’s demise gave China a convenient excuse to backslide on its commitments.
While the Clean Power Plan is delayed in the courts, the United States should continue emphasizing to the international community that it is comfortably on track to meet its first target: cutting emissions to roughly 17 percent below 2005 levels by 2020. Achieving that milestone will demonstrate a good faith effort to fulfill the government’s ultimate pledge, and ought to buy the U.S. some time to develop alternative pathways to its 2025 goal, should that prove necessary.
At least for now, the international community appears to be taking a “wait-and-see” attitude as the U.S. legal process unfolds, trusting the Obama administration’s assurances that the Clean Power Plan is legally sound, and that, even if it is struck down, other emission reduction measures could take its place. But in reality, replacing the plan would be challenging. There is no other obvious domestic policy measure that could, in one fell swoop, provide an equivalent substitute for the emission reductions potential of Obama’s plan in the time frame required, at least not one that a president could adopt unilaterally.
Some analysts might reply that shifts already underway in the utility sector—which are driven by regulatory, market, and technological forces that have nothing to do with the Clean Power Plan (such as low natural gas prices and regulations for conventional pollutants)—will result in significant greenhouse gas reductions over the relevant time period anyway. The suggestion is that these trends, together with tax incentives for wind and solar energy, which Congress has extended to 2019 for wind, and into the 2020s for solar, could largely make up for the loss of the Clean Power Plan.
That outcome is certainly possible, but it remains highly speculative because it relies on unpredictable economic forces. By contrast, Obama’s plan would lock in emissions reductions even if, say, natural gas prices rose and the market shifted away from favoring green technologies. Further, the Clean Power Plan makes the extension on tax breaks for wind and solar more effective. For example, the research company, Rhodium Group, projected that with the tax extensions, large-scale wind and solar projects will rise by 92 gigawatts between now and 2025, doubling the current capacity. But with the Clean Power Plan, solar and wind will rise by 142 gigawatts. In short, meeting the 2025 target is not impossible without the Clean Power Plan. But losing it would be, by any fair assessment, a blow.
So far, the EPA has been understandably restrained on suggesting possible alternatives to the Clean Power Plan. But if the Supreme Court strikes down the initiative, the agency will be pressed for a Plan B. One option, which even an adverse Supreme Court decision could leave open, would be to reduce the scope of the plan and set standards for power plants based only on what they can do on-site to cut emissions, such as through equipment upgrades, fuel switching, and other efficiency measures. The EPA could make some progress using this narrower approach, although doing so might, ironically, leave utilities with less flexibility to deploy the various cost-effective means of compliance available to them in the current rule. Under Obama’s plan, power plants can meet the carbon standards by trading emission reduction credits within and across states, and they can purchase credits or allowances from cleaner energy sources, like wind and solar power.
The EPA might also explore using section 115 of the Clean Air Act to address greenhouse gas pollution. This section of the law, titled “International Air Pollution,” allows the EPA to require the states to reduce pollution that endangers other nations, provided those nations reciprocate and afford the United States the same protections. Advocates of this approach suggest that the United States could argue that the Paris Agreement, or other bilateral and multilateral climate agreements, embody reciprocal protections. Skeptics of this approach worry about its legal vulnerability. The EPA might also consider setting a national ambient air quality standard for greenhouse gases, which would automatically trigger a state planning process to attain the standard. Setting a national concentration limit for a global pollutant would be challenging, however, and the EPA has believed so far that regulating major industry sources, like power plants, is more appropriate. Both of these options have risks and downsides, but if the Clean Power Plan is struck down, pressure will mount for the EPA to re-assess them.
CHOICES FOR THE NEXT ADMINISTRATION
If the Supreme Court ultimately upholds the Clean Power Plan, its fate still lies in the hands of the new president. On the one hand, he or she could withdraw it (but that would lead to more legal challenges) or hobble its implementation. The new leader could also implement it as-is or bargain with a new Congress over suspending the rule in exchange for a more comprehensive economy-wide approach to greenhouse gas regulation. This might be worth doing if such a scheme covered more industries and sectors, thus achieving more total emission reductions, and if it were more cost-effective overall than piecemeal implementation of the Clean Air Act.
Hopes of such a bargain are not high, however. Even if the Democrats were to retake the Senate in 2016, Congress is not likely to pass comprehensive climate legislation, given the difficult politics of climate change. Historically, congressional voting patterns on this issue do not fall out neatly along party lines, but rather have tracked with the resource endowment of states. For example, Democrats from coal states and states with manufacturing jobs voted against the American Clean Energy and Security Act, which passed the House in 2009. Making things harder, in recent years, climate change appears to have evolved into a hyper-partisan issue that, for now at least, seems to defy efforts at rational compromise.
Certainly, if Congress chose to act, it would have many options. It could revisit the idea of an economy-wide cap-and-trade program, or, more modestly, replace the Clean Power Plan with a different strategy for the power sector. Or Congress could adopt a carbon tax. A new president committed to addressing climate change, together with a like-minded Democratic majority leader of the Senate and a Republican Speaker of the House seriously interested in tax reform, could conceivably find common ground on a carbon tax proposal.
It is an overstatement then, to suggest that the success of international climate negotiations rests on the fate of the Clean Power Plan in U.S. courts. Far more decisive will be the outcome of the presidential and congressional elections in 2016. The question of U.S. leadership is what really keeps the international community up at night. But there is no doubt that it would be better for U.S. credibility, beneficial for the still-fragile Paris Agreement, and helpful to our delicate partnership with China on climate change, if the Clean Power Plan survived our legal process.
Forget Comprehensive Reform -- Let the States Compete