Regulating Carbon

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Monday, September 21, 2009

THE MOST effective way for the United States to fight global warming is for Congress to put a price on carbon, either through a cap-and-trade system or, as we'd prefer, a carbon tax that rebates the revenue to taxpayers. But last month the Senate Environment and Public Works Committee announced a delay in introducing its climate change bill. Senate Majority Leader Harry M. Reid (D-Nev.) said last week that such legislation might not be acted on until next year. Meanwhile, the Environmental Protection Agency is preparing to regulate carbon under the Clean Air Act. As Rep. John D. Dingell (D-Mich.) once warned, EPA action would create "a glorious mess" of regulation. How much of a mess is only beginning to become clear.

Gradually raising the cost of carbon, which Congress but not the EPA can do, would send signals throughout the economy that would help shift the nation to fuels and practices that wouldn't warm the planet. Research into such fuels and practices would become attractive to investors, and new technologies would emerge. Efficiency would become cost-effective. The government would set the goal, but the market, science and common sense would dictate how the country reached it.

EPA regulation has none of those advantages. The Clean Air Act gives the agency the authority to regulate carbon dioxide and other greenhouse gases as "pollutants." But that means only that the agency can go plant by plant, refinery by refinery, and issue orders ostensibly intended to limit their greenhouse gas emissions. Since almost all human activity emits some greenhouse gas, the EPA in theory also could go shopping mall by shopping mall, apartment building by apartment building. It says it is devising new rules to prevent that from happening.

But even plant by plant, how can you "limit" greenhouse gas? The short answer is, you can't. Or, no one knows. Or, you can't, yet. Take, for example, a coal-fired power plant. EPA regulation would be triggered only when someone wanted to build one or update an old one. At that point, the agency could demand that the plant use the "best available control technology" (BACT) to limit emissions.

Right now, no such BACT exists for coal-fired plants beyond better efficiency measures. A lot of attention has been focused on carbon capture and sequestration, but it wouldn't be considered BACT until it was up and running successfully in a coal-fired power plant somewhere in the United States. Even then, its use would have to be weighed against a number of other factors, such as the amount of energy used, the environmental impact and the effect on the output of other regulated pollutants. If past practice applies, the issuance of the final permit would be followed by a series of lawsuits. The whole process could take a decade or more -- and that would be multiplied hundreds or thousands of times across the country.

The Clean Air Act, in other words, is breathtakingly unsuited to the great task of battling global warming. It would provide no economy-wide and declining cap on carbon, no market signal to industry or clean-energy investors that could spark innovation and greater efficiencies. There would be a thicket of red tape and regulations but nowhere near the reduction in greenhouse gas emissions of the Waxman-Markey bill, let alone those called for by the Intergovernmental Panel on Climate Change.

The specter of EPA regulation is supposed to scare Congress into more rational action. Yet if Congress does not act, it's likely that the EPA will. It won't be pretty.


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