01/05/2011 01:27 pm ET | Updated May 25, 2011

We Can All Learn a Lesson From the EPA

On December 23, 2010, the Thursday before Christmas, EPA gave utilities and refineries a special Christmas gift. EPA announced it was going forward with greenhouse gas (GHG) regulations for utilities and petroleum refineries under the Clean Air Act (CAA). This was followed by an editorial on December 24th in the New York Times about how Republicans are going to keep Lisa Jackson, the Administrator of EPA, tied up on the Hill in hearings. Then on December 28, 2010, Representative Fred Upton (R-Michigan) and Tim Phillips (President of Americans for Prosperity) wrote an op-ed piece in the Wall Street Journal entitled "How Congress Can Stop the EPA's Power Grab" discussing how dastardly an act EPA had taken by ignoring Congress and keeping its actions hidden until after Congress left for holiday.

The article is a masterful advocacy piece for doing nothing. On the "scare the public front," it makes two unlikely claims: (1) EPA is going to regulate homes, and (2) electricity prices will be significantly higher.

The EPA, of course, is in a hurry to move ahead. It wants to begin regulating the largest emitters first. It has the authority under its endangerment finding to regulate emissions by hospitals, small businesses, schools, churches and perhaps even single-family homes. ...Cuts in carbon emissions would mean significantly higher electricity prices.

EPA has specifically focused on the largest emitters that account for 70% of all GHG emissions not schools and churches. Electricity prices may go up but even that is questionable since the units that are going to be most affected are older coal plants that are already more expensive than natural gas plants on a total cost per MWh basis (i.e., capital expenses, operation and maintenance plus fuel).

The WSJ article makes three claims regarding process, law, and Congressional authority: (1) EPA hid their intentions, (2) the CAA was never meant for GHG, and (3) EPA needs to let Congress do its job. All of these claims are similar half-truths to inflame a base.

EPA's actions are NO surprise. EPA's announcement is actually part of a well-orchestrated legal jigsaw puzzle that began in early 2010. In April 2010, EPA responded to comments on the Light-Duty Vehicle Greenhouse Gas Emission Standards. This is a rule most would never focus on since it requires better gas mileage from vehicles but Industry and Environmentalists all saw the end game. The South Carolina Pulp & Paper Association (SCPPA) wrote: "SCPPA has significant concerns with the Greenhouse Gas Emission Standards provisions in the rule, primarily related to greenhouse gases triggering of Title V and New Source Review (NSR) permitting provisions of the Clean Air Act." SCAPPA's comments were echoed by many of the trade groups who have fought climate change. Everyone knew what was coming.

The Clean Air Act (CAA) covers GHG. Surprisingly, the least activist court in the land, The Supreme Court, ruled that the Agency could regulate GHG under the Clean Air Act once it has determined it causes harm. Let's leave the issue of whether GHG causes harm aside save to say that I think the East Coast and California are certainly getting real examples of the mischief Siberian moisture can cause. The more interesting argument about the Clean Air Act not being written for GHG deals with regulatory burden. Many of the groups fighting the use of the Clean Air Act to fight GHG are concerned about the ultimate reach of the rule and the large number of previously "too-small to consider facilities" that would now be regulated. The problem is that GHG, as measured by CO2 equivalence, is emitted in such large quantities, even from small sources, that statutory limits in the CAA could be exceeded. This would require regulation at a level no one, or no rational person, would want to create. To partially solve this problem, EPA wrote a tailoring rule to raise the threshold that causes a facility to be controlled. Whether this is sufficient, only time will tell, but it is clear that EPA is following a conservative path to implement GHG rules.

Let Congress do its job. Perhaps the best way for Congress to do its job is for EPA to follow the law. In all the comments on the Light Duty Vehicle Rule, No one said, "gee you can't regulate GHG." The comments were all "let's wait, too tough, don't hurt us, let Congress handle it, you didn't consider cost." So we are on a path where EPA is sensibly following the CAA to regulate GHG. Congress can scream, kick, hold hearings and all sorts of other mischief. However, until it follows EPA's lead and does its job and passes climate change legislation, EPA is going to move forward following the existing law. As EPA moves toward control of GHG for utilities and refineries, constituencies and Congress will be left with either finding a better solution or accepting EPA's.

John Podesta for the last couple of months has been saying President Obama should start using the power of the Presidency and stop relying on Congress. It's good advice and this latest EPA action may be the first of many examples of a more assertive Executive.