International Greenhouse Gas Offsets under the Clean Air Act

Offsets, and in particular international offsets, have been advanced as an important tool in climate policy, capable of significantly reducing the costs of emissions reductions. As attention turns to the existing CAA as a potential vehicle for general reduction of GHG emissions, an important question is whether regulation under the statute is compatible with international offsets. Certain regulatory programs under the CAA are likely candidates for GHG regulation, but many of them are legally incompatible with international offsets. Those programs that might permit use of international offsets have other problems that make them unpopular choices for GHG regulation. To the extent that CAA regulation depends on state action, state law and constitutional limitations appear to offer more barriers than opportunities for use of international offsets. These conclusions have implications for the costs and flexibility of climate policy under the CAA

Playing without Aces: Offset and the Limits of Flexibility under Clean Air Act Climate Policy

The United States Environmental Protection Agency (EPA) continues to move ahead with regulation of greenhouse gas emissions under the Clean Air Act (CAA). Previous work has indicated that basic forms of compliance flexibility—trading—appear to be legally permissible under section III of the CAA. This Article takes a close look at more expansive and ambitious types of flexibility: trading between different kinds of sources, biomass co-firing, and above all, offsets. It concludes that most types of such extended flexibility are either legally incompatible with the CAA, or so legally problematic that EPA is unlikely to adopt them. This has important implications for both the costs of the CAA climate policy and the level of environmental benefits that are achievable. It also creates tension between the CAA climate policy and state-level policies, such as California’s, that aim to include various forms of extended flexibility

Social License to Regulate: Consumer-Producer Collusion and Related Policy Risks for Consumer-Facing Regulation

Used a gas can recently? If not, prepare for a surprise—they’ve become harder to use due to government-mandated design changes aimed at reducing air pollution. Faced with persistent environmental and other challenges, government regulators have increasingly turned to similar regulations on consumer products. But these consumer-facing regulations create new policy and political problems for regulators, different from those associated with traditional industry-facing regulation. This paper looks in depth at three case studies of consumer-facing regulation: emissions controls on gas cans, efficiency standards for light bulbs, and European vehicle fuel economy standards. In each case, there is strong evidence for widespread evasion of the regulations by consumers and by consumers and producers working together. This evasion may substantially undercut the targeted benefits of the regulations. Moreover, consumer dissatisfaction with the regulations appears common, perhaps indicating underappreciated costs to consumers and playing in to anti-regulatory narratives. Building on these case studies, this paper explores options available to regulators for reducing incentives and opportunities to evade consumer-facing regulation and for anticipating or reducing consumer dissatisfaction. Such options include externality pricing, stricter (and smarter) enforcement, careful selection of regulatory targets, modifications to exante cost-benefit analysis, and, in some cases, eschewing regulation entirely in favor of providing information or other less-intrusive policies

Deference is Dead, Long Live Chevron

Chevron v. NRDC has stood for more than 35 years as the central case on judicial review of administrative agencies’ interpretations of statutes. Its contours have long been debated, but more recently it has come under increasing scrutiny, with some—including two sitting Supreme Court Justices—calling for the case to be overturned. Others praise Chevron, calling deference necessary or even inevitable. All seem to agree the doctrine is powerful and important. This standard account is wrong, however. Chevron is not the influential doctrine it once was and has not been for a long time. It has been eroded from the outside as a series of exclusions have narrowed its scope and has been hollowed out from the inside as Justices have become ever more willing to find clear meaning in statutes, thereby denying deference to agencies. In recent years, agencies have won only a handful of statutory interpretation cases, and none in more than four years. Only once since 2015 has deference been outcome-determinative. At the Supreme Court level—though not, for now, in the circuit courts—deference is dead. The once-crystal Chevron has turned to mud. As a result, however, it is less likely to be formally overturned than widely believed—critics of deference and of administrative power on the Court would gain little. Instead, Chevron’s future is likely to be one of further decline, at least in the short term. This has implications for major policy areas like climate change, health care, and immigration where regulatory policy is necessary and challenges are likely to reach the Court

Managing the Risks of Shale Gas Development Using Innovative Legal and Regulatory Approaches

Booming production of oil and gas from shale, enabled by hydraulic fracturing technology, has led to tension between hoped-for economic benefits and feared environmental and other costs, with great associated controversy. Study of how policy can best react to these challenges and how it can balance risk and reward has focused on prescriptive regulatory responses and, to a somewhat lesser extent, voluntary industry best practices. While there is undoubtedly room for improved regulation, innovative tools are relatively understudied. The liability system predates environmental regulation yet still plays an important — and in some senses predominant — role. Changes to that system, including burden-shifting rules and increased bond requirements, might improve outcomes. Similarly, new regulation can and should incorporate modern understanding of the benefits of market-based approaches. Information disclosure requirements can benefit the liability system and have independent benefits of their own. Policymakers faced with a need for policy change in reaction to shale development should carefully consider alternatives to regulation and, when regulation is deemed necessary, consider which tool is best suited

Comparing the Clean Air Act and a Carbon Price

Over the last half-decade, a variety of federal legislative proposals for limiting greenhouse gas (GHG) emissions have been put forward, most of which would set a price on carbon. As of early 2013, the one politically plausible policy appears to be a carbon tax, passed as part of a larger fiscal reform package. Meanwhile, the U.S. Environmental Protection Agency has begun regulating GHG emissions from a variety of sources using its authority under the Clean Air Act. It may be necessary to choose between these two policies, however. The Waxman-Markey cap-and-trade bill that failed in 2009 would have preempted much of this authority, and it appears likely that a carbon tax law would do the same. But how can one make this choice

Tradable Standards for Clean Air Act Carbon Policy

EPA is in the process of regulating U.S. greenhouse gas (GHG) emissions using its powers under the Clean Air Act. The likely next phase of this regulatory program is performance standards under Section 111 of the act for coal plants and petroleum refineries, which the agency has committed to finalize by the end of 2012. Section 111 appears to allow use of flexible, market-based regulatory tools. In this paper, we discuss one such tool, tradable standards. Tradable standards appear to be a legally and politically viable choice for the agency, and evidence suggests they are substantially more cost-effective than traditional performance standards. The paper discusses implementation issues with tradable standards, including categorization, banking, and phased implementation, as well as broader issues with the Section 111 rule-making process as it relates to state-level GHG regulatory efforts

Greenhouse Gas Regulation under the Clean Air Act: Structure, Effects, and Implications of a Knowable Pathway

It appears inevitable, absent legislative intervention, that regulation under the Clean Air Act (CAA) will move beyond mobile sources to the industrial and power facilities that emit most U.S. greenhouse gas (GHG) emissions. We analyze the mechanisms available to the EPA for regulating such sources, and identify one, New Source Performance Standards (NSPS) as the most predictable, likely, and practical, i.e. knowable, pathway. Based on the legal structure of the NSPS and the EPA’s traditional approach, we analyze a hypothetical GHG NSPS for one sector, coal electricity generation. This analysis indicates that efficiency improvements and perhaps biomass cofiring could be implemented through the NSPS, yielding modest but meaningful emissions reductions. Trading could also rein in costs. Though analysis is limited to one sector and does not include modeling of costs, it suggests that CAA regulation, though inferior to comprehensive climate legislation, could be a useful tool for regulating stationary-source GHGs

Hydraulic Fracturing on Federal and Indian Lands: An Analysis of the Bureau of Land Management\u27s Revised Proposed Rule

The federal government controls 700 million acres of subsurface rights (plus 56 million subsurface acres of Indian mineral estate) across 24 states, making it the largest landowner in the nation, and therefore in a position to negotiate lease terms and shape regulations of oil and gas development. The federal Bureau of Land Management’s (BLM) rules on how drilling activity can take place on federal lands essentially dictate terms, making BLM the largest “regulator” of drilling activity in the country. BLM last revised its oil and gas regulations (the Onshore Orders) in the 1980s and early 1990s, well before the recent rapid expansion of shale gas development. To date there are two rounds of proposed revisions, the first issued in 2012 and the most recent issued in May 2013, after BLM received 177,000 comments on the first round. This paper examines the 2013 proposal in several key respects, including the scope and requirements of the new proposal, the substantial changes from the 2012 proposal, and a comparison of BLM’s proposed rules with rules in states with shale gas development and significant federal land holdings, based on earlier work. We find that BLM’s proposal addresses some apparent gaps in state-level regulation and that, generally, BLM rules do not appear to impose significant requirements beyond existing state regulations, at least across the regulatory elements we analyzed and in those states with large federal land holdings