A game of regulation with jokers in the deck

When courts call, the EPA folds. Most recently the call was for the U.S. Environmental Protection Agency, representing the Administration in office from 2001 to 2009, to justify its Clean Air Interstate Rule, which was under development from 2001 through 2003. The EPA lost everything. Its entire rulemaking action was canned, and the agency was told to start over, in a decision from the Third Circuit Court of Appeals, North Carolina v. Environmental Protection Agency, No. 05-1244, July 11, 2008.

From its beginnings, CAIR, the Clean Air Interstate Rule, was a scam purporting to regulate stringently the air pollution emitted by power-plants that flows from state to state, while actually offering power-plant operators a low cost, if not a free, ride. Emissions were to be regulated only on a regional basis, using a trading system through which power-plant operators could buy the rights to pollute. Pollution limits, on the other hand, were to be regulated on a local basis, requiring potentially draconian measures by cities and counties found out of compliance, but giving them no powers to stop emissions coming from somewhere else. Enforcement of local limits was scheduled for 2010, one convenient year after the Administration responsible for the system had left office, dumping inevitable problems onto its successor.

The tip-off to a scam was the EPA focus in CAIR on “highly cost-effective” emission controls. The agency was set up to regulate pollution, not industrial finance. It is charged by law to insure that power-plants use the "Best Available Control Technology" to reduce emissions when new plants are built or old ones are significantly renovated. As the Court of Appeals stated, "Because EPA evaluated whether its proposed emissions reductions were 'highly cost effective' at the regionwide level, assuming a trading program, it never measured the 'significant contribution' from sources within an individual state to downwind nonattainment areas." The EPA did not document the amounts of air pollution travelling from power-plants to local areas and had no plans to monitor them.

The power industry is now crying wolf and apparently influenced the New York Times to howl along. In an article published July 12, 2008, power industry representatives were quoted condemning the court decision, one spokesman saying, "one of the things we crave is certainty, and this goes in the other direction." The EPA Administrator during development of CAIR was a former governor who, according to the Times, had been criticized "in the name of attracting businesses" for having "compromised water pollution protections and cut spending for state offices that prosecute environmental abuses by industry." That was hardly enough, and the agency was routinely told what to do and sometimes how to do it. Evidence for its continuing manipulation can be read in an EPA proposal of July 11, 2008, to investigate regulating carbon dioxide, as the agency was instructed to do by a Supreme Court decision in Massachusetts v. Environmental Protection Agency, 549 U.S. 497, April 2, 2007. The recent announcement starts by exhibiting a letter to the current EPA Administrator from an appointee responsible for Regulatory Affairs in the President's Office of Management and Budget, saying what to do and how to do it.

But now the hands have been played, the game is almost over, and the jokers are leaving. The problems that CAIR would supposedly address are still with us, of course. Were we to take care in regulating pollution rather than CAIR, we would account not only for emissions but also for power flowing from state to state. Southern California, for example, is notorious for drawing heavily on coal-fired power-plants in the Southwest, thus enjoying "clean" power while sending most of the pollution somewhere else. One possible approach, in somewhat the spirit of the discredited CAIR, is to charge Southern California electricity consumers directly and explicitly for pollution emitted by their practices.