issue: Energy & Environment

The Supreme Court Hears AEP v. Connecticut

Posted on by The Progressive Policy Institute

Would that allow you to sue all those farmers . . . cow by cow, or at least farm by farm? – Justice Scalia

You’re going to put a $20 a ton tax on carbon, and lo and behold, you will discover that nuisance will be abated. And we bring in 15 economists. – Justice Breyer

In oral arguments for AEP v. Connecticut today the Supreme Court today seemed skeptical of Connecticut and other states’ argument that they should be allowed to pursue nuisance suits against major power companies for their GHG emissions. The transcript is available, and SCOTUSblog has a good overview of the arguments. Though making predictions based on oral arguments is dangerous, I will be very surprised if the court allows this case to proceed. But it is much less clear which of the available reasons for halting the case the court will choose. That decision will have implications that extend well beyond the legal details, and choosing one of the reasons—displacement—could even be beneficial for climate policy.

To recap for those of you that haven’t been following the case, the court has four separate plausible justifications for dismissing it. Very briefly but (hopefully) in plain English, the court could rule that the states can’t sue because:

a) any injury from climate change can’t be traced to the power companies, or courts can’t craft a remedy (Article III standing),

b) the harms of climate change are too generalized and better addressed by Congress (prudential standing),

c) climate change is a “political question” that courts can’t decide; or

d) the Clean Air Act and EPA “displace” federal common law suits like this one.

With four separate grounds available, all of them arguably applicable, the states were always on shaky ground. In fact, the only way I can see the court allowing the case to proceed is if the justices cannot agree on which rationale to choose. If there is no majority, the lower court decision (which favored the states) would stand. This is slightly more likely than normal since Justice Sotomayor has recused herself, making a 4-4 split possible. But this outcome is unlikely. The court will probably choose one (or more) of the rationales and dismiss the case.

The justices spent some time at arguments on each of the four rationales. The political question doctrine was discussed the least, but I can’t rule out any of the four. But it is interesting that two of the justices most likely to rule in the states’ favor—Justice Kagan and Justice Ginsburg—focused on the displacement issue. Each seemed to feel EPA moves to regulate GHGs were significant, and in tension with a nuisance suit: Ginsburg suggested that the suit would require courts to become a “super EPA” without the expertise for that role. If these justices favor dismissing on displacement grounds, that may be the compromise that emerges from the Court.

It helps that an opinion citing displacement almost writes itself—this case was filed, decided, and appealed at a time when EPA never looked like regulating GHGs. A lot has happened since then: Massachusetts v. EPA, the 2009 GHG endangerment finding, new vehicle emissions rules, and the late-2010 settlement agreement under which EPA committed to regulating emissions from exactly those facilities the states are pursuing: the electric power sector.

The states point out that these regulations aren’t in place yet, and though I don’t think that helps them avoid legal displacement, it illustrates why a court decision based on displacement would be so important. If you’ve been following Congress this year, you know EPA authority over GHGs is under threat. It narrowly survived the 2011 budget process, and is likely to be targeted again. But if this authority is all that stands between emitters and federal nuisance suits, it becomes much harder to get rid of. The power companies already acknowledge in their brief that EPA does have the authority to regulate GHGs from their plants (which should, by the way, finally end attempts to rhetorically relitigate Massachusetts v. EPA). If the Supreme Court rules that Congress displaced suits like Connecticut when it gave broad authority to the EPA under the Clean Air Act, legislators are much less likely to take that power away, at least not without putting something new in its place.

So while a loss for the states on displacement grounds might seem like an anti-environmental result, it would be just as accurate to view it as pro-EPA. Dismissal of the case on standing or political question grounds does not have this effect. This also illustrates why displacement is the narrowest grounds for dismissal—if the EPA fails to act or is disarmed by Congress, the Court can revisit the issue, and only then would it need to draw sweeping conclusions about the scope of broad legal doctrines.

The EPA, armed only with its current powers, is not the ideal architect for climate policy—but it is a far better venue than the courts, for both practical and philosophical reasons. The justices today seemed acutely aware of these limitations. Assuming my prediction is correct and this case is dismissed, I agree with others who argue that is the right result regardless of our views on climate policy. But it’s possible that in dismissing the case the Court will strengthen the EPA. If so, that’s good news for the climate too.

How to Think About AEP v. Connecticut

Posted on by The Progressive Policy Institute

Today, the U.S. Supreme Court will be hearing oral arguments in AEP v. Connecticut, a case that will decide whether eight states have the right to sue American Electric Power (AEP) Co. and several other utilities for greenhouse gas emissions. The states have argued that carbon dioxide emissions are a “public nuisance” because they contribute to climate change. They’re hoping to force the companies to reduce their emissions through litigation. The power companies have argued that because of the complexity of climate change, it’s impossible to draw a causal link between any specific emissions and any unwelcome changes in the weather.

For helpful background on the case, there’s no better place to turn than to a recent PPI memo entitled “Why Progressives Should Cool to ‘Global Warming’ Lawsuits.” In the memo, author Philip Goldberg argues that such litigation makes little sense:

Progressives should … not reflexively support climate change litigation, no matter how passionately one might favor emission reductions. We should adhere to our principles and protect due process rights of defendants, even when those defendants are large corporations. The David and Goliath analogy may score political points, but it only works in litigation when Goliath does something objectively wrong. Otherwise, any group that fails to get its way in the political arena will turn to the courts. Such an act would be an affront to democratic proceduralism that has long defined our progressive philosophy.

You can read the entire memo here.

Obama Needs a Stronger Veto Threat on EPA Regulations

Posted on by The Progressive Policy Institute

Brinksmanship is the name of the game in Washington this week. GOP leaders are publicly shifting away from negotiation tactics and turning to endgame spin strategy in advance of a government shutdown, while President Obama continues working to secure a deal without staking out an early position in the blame game that’s soon to follow.

A perfect example of the GOP’s unanswered offense in this game is the timing of votes in both houses this week to strip the EPA of its ability to move forward with new greenhouse-gas regulations. There has been no shortage of Republican proposals in both houses of Congress to do this for months, plus a handful of Senate Democrats who also support some version of stopping or delaying the EPA climate rules. But what better time to bring up a divisive issue with no hopes for compromise than in the last hours of an overheated budget standoff? Tactically speaking, it’s a reminder of why Republicans are always so much better at strategy and spin than Democrats, but it could also prove to be another example of how their ideological extremism eventually undermines their strategic successes.

Already the White House is playing defense, trying to calm environmentalists after rumors that the administration has been using the EPA’s authority as a bargaining chip to secure a budget deal and avoid a shutdown. On Tuesday, OMB issued a policy statement warning that if the House measure ever reaches the President’s desk, “his senior advisors would recommend that he veto the bill.”

That’s fairly strong language for OMB bureaucrats to use, but it’s pretty pathetic as the only public response of the White House to direct attacks one of the most significant regulations issued by this administration. Much of the media coverage has interpreted the statement as a promise to veto the House bill, but it includes no such promise. As veto threats go, this one is half-hearted at best.

With the budget fight reaching a fever pitch and GOP leaders raising the stakes by bringing climate change into the game, it’s time for the President to take a side on this fight before votes are cast, not after.

President Obama should announce clearly and unequivocally that he will not sign any bill that delays, repeals, or compromises the EPA’s greenhouse-gas regulations, until Congress has passed legislation adopting some form of long-term national energy and climate strategy.

Here’s why: the EPA regulations are the last leverage he has left at this point to get any energy bill through Congress, and they may be one of the only political defenses he has post-shutdown for not reaching a budget deal with Republicans. Even entertaining the possibility of trading away EPA’s regulations for a budget deal is not only a loser’s hand in the short term, but it would be the end of any hopes he might have to move any meaningful energy agenda during his first term, and possibly his second.

For some presidents, calling for this type of statement and strong positioning might not be a big thing to ask for. But President Obama has shown consistently he prefers to lead from the rear, leaving the bloodshed to members on the front lines in Congress, many of whom are no longer around to fight after casting tough votes for last year’s energy bill. The administration’s reluctance to lead on climate and energy in 2010 gives congressional Democrats facing tough races little reason to think they will get any cover in 2012 for defending the EPA this year.

What’s more, President Obama faces two problems if he chooses to stand up more forcefully for the EPA’s regulations. His first problem is the perception Republicans are promoting that this is more simply more “job-killing” regulation heaped onto an already weak economy. That thinking has a number of vulnerable Democrats spooked, especially in the Senate, where a handful of moderates already co-sponsored a bill to delay the regulation for two years.

Obama’s second problem with trying to defend the EPA rules is that he has never strongly supported them up until now. The administration has soft-pedaled its commitment to the EPA rules from the beginning, presumably to use them for leverage to motivate industry opponents and their many representatives in Congress to support a less painful alternative, such as cap-and-trade. The fact that they did such a poor job of using that leverage to actually enact an alternative now leaves them stuck with regulations they have said they don’t want, and a Congress that doesn’t want them either, but also doesn’t want to give him a better alternative.

Anyone who thinks Obama will fall on his sword to protect the EPA rules in addition to passing an energy bill hasn’t listened to what he and his advisors have said about the rules for the last two years. You just need to look at the EPA’s official press release for its initial endangerment finding in December, 2009, which was supposed to explain why the regulations were so critical and necessary to mitigate the threat that greenhouse gases pose to public health and welfare. Instead, EPA pitched it as an unavoidable Plan B forced by a Supreme Court decision and Congress’s failure to act first:

President Obama and Administrator Jackson have publicly stated that they support a legislative solution to the problem of climate change and Congress’ efforts to pass comprehensive climate legislation. However, climate change is threatening public health and welfare, and it is critical that EPA fulfill its obligation to respond to the 2007 U.S. Supreme Court ruling that determined that greenhouse gases fit within the Clean Air Act definition of air pollutants. (link here)

If anything, the administration seems even less committed now to greenhouse gas regulations than it did then. Carbon emissions aren’t exactly at the top of President Obama’s list of talking points these days. In fact, his recent signals on energy policy appear deliberately calculated to move away from climate change positions altogether in favor of arguments for energy innovation, job growth in clean energy industries, and (as of last week’s speech at Georgetown) energy independence.

Obama made a bold attempt to reframe the energy debate in his State of the Union address, but not once in that speech did he reference climate change, cap-and-trade, the environment, or the EPA. His proposal for a new “clean energy standard” that moves us away from older fossil-fuel resources over the next 25 years has not picked up much energy of its own in Congress, and the President has yet to fill in the details of the proposal, leaving congressional leaders struggling to make sense of it on their own.

It is still unclear whether President Obama believes his clean energy standard or any of the proposals he mentioned last week would be sufficient steps toward carbon reduction to justify trading away the EPA’s regulatory authority over greenhouse gases. It’s even less clear whether all of those things together would be enough for environmentalists to even entertain the thought such a trade might happen.

Presumably, the comprehensive energy bill that passed the House last year would have been a strong enough substitute, but Waxman and Markey are not committee chairmen anymore. GOP members in the House have turned back time and aggressively attacked the science behind global warming, forcing advocates to invest more in defending the EPA’s actions, which may make it harder for the President to make a deal that undermines those actions.

Regardless of what hopes environmental groups may have for moving forward on clean energy while defending the EPA at the same time, it may be necessary to put everything on the table if we want any forward movement on energy policy in the foreseeable future.

But for now, what’s important is there is no such movement to be seen yet. So whatever type of climate or energy bill might justify regulatory horse trading, now is the time for talking about it. Given the state of the budget mess and the absence of political will to tackle energy legislation, now is the time for backing up bold speeches with firm conviction.

Discussing The Future of Nuclear Power After Fukushima

Posted on by The Progressive Policy Institute

Nuclear power should remain an important part of our energy mix. Despite a worst-case scenario, the older generation Fukushima reactor has held up remarkably well. And yet, serious obstacles remain, not the least of which is the public’s irrational fear of nuclear disaster.

Such were some of the conclusions from a PPI Policy Briefing on the future of nuclear power, held today in the Rayburn House Office Building. The panel featured: Dr. James Conca, Director of the Waste Sampling and Characterization Facility (WSCF), U.S. Department of Energy’s Hanford Site; Margaret Harding, President, 4 Factor Consulting; and Micheal A. Levi, Director of Energy Security and Climate Change Program, Council on Foreign Relations.

PPI’s Scott Thomasson moderated, and Mitchell Baer, of the Office of Policy and International Affairs, U.S. Department of Energy, introduced the panelists.

Conca kicked off the discussion making the case for a 2040 energy mix that is the one-third fossil fuels, one-third renewables, and one-third nuclear, as laid out in his recent PPI Memo, “Getting Real About Energy: A Balanced Portfolio for America’s Future.”

“This mix decreases carbon dioxide emissions by half, costs 20 percent less than the baseline, and it’s achievable, though it takes strong political will,” Conca said.

As the discussion moved to the future of nuclear, the first issue was the legitimacy of the old fears raised again by the Fukushima collapse.

“One of the things about radiation is that it’s very scary,” explained Conca. “That was the whole point of the Cold War – to scare everybody about nuclear weapons. But we forget to distinguish between weapons and energy. Weapons are bad. Energy is good.”

But, Conca noted, just because we can detect radiation in the air it doesn’t mean that it is harmful.

Harding noted that there has not yet been a single radiation death from the Fukushima plant, and all 128 people with reported contamination are now fine.

But while safety is obviously an important issue, Levi added that the real barrier to nuclear gaining ground in the U.S. is not safety, but cost. In short, nuclear requires an increasingly insurmountable upfront investment that takes decades to recoup.

“The price of building a plant has steadily risen,” Levi said. “The bottom line is that without a significant incentive on carbon emissions, and with natural gas prices where they currently are, you will not expect to see a large number of nuclear power plants built.” (Levi’s guess was five by 2035).

“It’s not clear that Three Mile Island killed nuclear,” he added. “Costs were already going up when it occurred.”

But, on a more optimistic note, Conca said that “The longer you run the plants, the more cost-effective they’ll become. You’re going against the short-term investment of certain groups. We need to decide where we want to be in 2040.”

“Humans are very good at engineering things,” he added. “But we don’t do the social and political stuff as well.”

The panelists also discussed improvements in technology that have made nuclear plants much safer and more effective. New Generation 3 reactors probably could withstand a similar stress with even less damage.

“The next generation of reactors have significant passive safety systems, and the reactor could not have any other support for three days and be okay,” said Harding. “The whole event would have played out differently if one of these had been installed.”

But Levi cautioned that innovations in safety could actually slow the regulatory approval process because it will take a long time for regulators to become familiar with the new technologies.

“With new technologies we have to redo our regulatory assessment and the first few times we don’t know what will happen,” he said. “It introduces regulatory uncertainty and increases financing costs. We need managed innovation.”

Harding reminded the audience that, “In the 1970s, each plant was unique, and that adds to complexity in the regulatory space. The goal should be to make the next generation plants more like cars.”

Despite notes of caution, the panelists overall were optimistic about the future of nuclear power. Conca re-emphasized the need to get started now, because things take a while to get moving.

“If we start now with something ambitious, we will make a significant change,” he said. “But if you wait, you move that 30-year window out and out. You have to come up with a plan that gets you where you want to go.”

TODAY: The Future of Nuclear Power After Fukushima

Posted on by The Progressive Policy Institute

In the wake of the disaster at the Fukushima nuclear power plant, new questions are being raised about the future of nuclear power. The President has reaffirmed his support for nuclear power, but the public is still looking for answers. U.S. regulators are currently conducting an exhaustive review of safety systems at the nation’s 104 reactors.

Should nuclear power continue to be an integral part of our national energy mix? What long-term impact will the Fukushima incident have for nuclear power in the US and around the world? To find out the answers to these and more nuclear power-related questions, please come to a PPI Policy Briefing TODAY, March 28, from 12-1 p.m., at the House Science and Technology Committee Hearing Room, Room 2325 of the Rayburn House Office Building.

Featured panelists will be:

  • Mitchell Baer, Office of Policy and International Affairs, U.S. Department of Energy;
  • Dr. James Conca, Director of the Waste Sampling and Characterization Facility (WSCF), U.S. Department of Energy’s Hanford Site;
  • Margaret Harding, President, 4 Factor Consulting; and
  • Micheal A. Levi, Director of Energy Security and Climate Change Program, Council on Foreign Relations.

Conca is the co-author of the recent PPI Policy Memo, “Getting Real About Energy: A Balanced Portfolio for America’s Future,” which argues for a 30-year target energy mix for electricity generation of one-third fossil fuels, one-third renewable sources (wind, solar, biomass, hydro), and one-third nuclear generation.

TO RSVP for the event, click here.

Republicans for Environmental Progress: An Endangered Species

Posted on by The Progressive Policy Institute

For most of modern American history, the two major political parties in America have largely agreed on the desired long-term environmental outcomes for the country: there was a consensus among Republicans and Democrats that it was a good thing to press for cleaner air and water, less toxins in the environment, biodiversity preservation, and mitigation strategies for clean energy and, mostly recently, climate change.

The disagreements were largely centered around how to achieve these outcomes, and to some extent the pace of change and the absolute targets. Democrats by and large preferred a heavier regulatory approach (i.e. “command and control”) that set specific firm-level emissions limits, prescribed permissible technologies, and set industry-wide energy and fuel efficiency standards. Republicans tended to support more market-oriented policies, with cap and trade foremost among them.

Nowadays, the arguments are no longer over the methods to achieve environmental progress, but whether we should support such progress in the first place. This situation is unprecedented. Those who believed that divided government would lead Republicans to take a more moderate and constructive role have so far been proven wrong. It is hard to imagine the situation being much worse for America’s environmental quality, which is directly linked to the quality of life for all Americans.

The modern Republican Party has absolutely no affirmative environmental agenda whatsoever, and goes so far as to contest the entire rationale for continued environmental progress. Ironically, this extremely reactionary environmental agenda is coming at a time when the ideas that Republicans once championed are now widely accepted as the best ways to structure environmental policy.

The cap and trade bill that died in the U.S. Congress in 2010 was based on market-oriented principles that were the centerpiece of George Bush Sr.’s cap and trade policy for sulfur dioxide, enacted in 1990. It permitted maximum flexibility in achieving its goals of greenhouse gas reductions over a long time horizon, giving businesses plenty of time to adjust and adapt. The bill’s intellectual foundations were so strongly rooted in conservative economics that then-presidential candidate John McCain was a huge supporter of the measure and included it in his presidential platform.

And yet today, the Republican-led House of Representatives has voted to deny the science of climate change and strip the EPA of its authority to regulate greenhouse gases, which was granted to the agency by a 5-4 decision in the very conservative-leaning Supreme Court. The GOP-led House has proposed gutting the EPA’s budget as well. And it gets worse.

The Republicans in the House have refused to end the subsidies for oil companies (as these firms continue to rake in record profits), and while they seek to reduce food stamps, they have made it clear that they will not touch the billions in agricultural subsidies that disproportionately benefit big agribusiness. Adding insult to injury, House Republicans even reintroduced Styrofoam into the House cafeteria after Democrats had removed it during the last Congress.

I have been involved in environmental policy for almost 20 years and have never seen anything like the current Republican assault on the environment. It is truly astounding. To be clear, the Republicans leading this charge against environmental progress are in no way following conservative principles ― they are doing the exact opposite. Those who profess to support conservative economics should be leading the charge against subsidies for big business and taking a firm stance in favor of the “polluter pays principle,” which states that those producers and consumers whose actions degrade the environment should pay for the damage. (You know we’re living in an upside down world when the one avowed socialist in the Senate, Bernie Sanders, has been the most vociferous opponent of oil company handouts.)

There is absolutely nothing “free market” about letting polluters trash the environment for free. In fact, this fits the definition of a market failure, not a well-functioning capitalist system. What the Republicans are currently practicing is crony capitalism of the worst kind: rewarding industry at the expense of the public interest and future generations.

It is the Republican rank and file who should be the most offended by these policies. Public opinion polls consistent show that both Democrats and Republicans care deeply about the environment, and support clean energy policies and strong environmental safeguards. Unfortunately, the once proud environmental ethic of the Republican Party has been snuffed out by a small group of radical Tea Party extremists who are deeply confused both about true conservative principles and the proper role of government in society. And once moderate Republicans who supported sensible environmental policies are nowhere to be seen. Until true conservatives retake the Republican Party we will be left doing little more than damage control, and the chances of a new comprehensive affirmative environmental agenda are slim to none.

Beware the “Japan Syndrome” Narrative

Posted on by The Progressive Policy Institute

Taking Rahm Emanuel’s advice to heart, U.S. anti-nuclear activists are using the emergency in Japan to stoke premature panic in the United States about atomic energy. While the rest of us might want to wait and see what actually happens with the Fukushima Daiichi plant before leaping to conclusions, it’s not too early to draw three conclusions that belie this fearful, “Japan Syndrome” narrative.

First, while Japan is the world’s most seismically active country, vast swaths of the United States aren’t active. We probably won’t be siting new reactors on the San Andreas Fault.

Second, what’s been most striking about the Daiichi plant isn’t its vulnerability, but its resilience. The 40-year-old facility plant has thus far withstood one of the biggest earthquakes in memory, followed by a tsunami and multiple interruptions in power. Scientists say hydrogen explosions have vented minor amounts of radiation into the air.

Third, the health and environmental risks of nuclear energy don’t seem any greater than those associated with other conventional power sources, and in fact are distinctly lower than those of coal-mining and offshore oil drilling.

Continue reading at The Arena on Politico

On Energy, Long-Term Targets Needed

Posted on by The Progressive Policy Institute

This piece was originally posted at National Journal’s Energy and Environment Expert Blog

Asking what our energy mix will be three decades from now is exactly the right question to reframe the debate about our national energy policies—or lack thereof. Most of our discussions would be a lot more productive if advocates for different approaches laid out a clear vision of what our future mix of fuel sources would look like in 30 years, so voters and policy wonks alike will be able to better understand and compare competing proposals. We should start with simple but achievable targets, such as the “Balanced Energy Portfolio” that sets a 2040 goal of using one-third renewables, one-third nuclear, and one-third fossil fuels to generate the country’s electricity and avoiding increases in greenhouse gas emissions.

Too often our recent battles over energy legislation have focused on specific mechanisms for shaping our energy future, without making a clear case for what that future should actually look like. Trying to sell cap-and-trade, carbon taxes, or renewable energy standards isn’t going to work unless we can judge these abstract ideas against easily understood energy targets. That’s why President Obama was right to reduce his new energy agenda to a simple goal: producing 80 percent of our electricity from clean energy sources by 2035.

The elegance of the President’s clean energy messaging is made possible by his nearly total avoidance of mechanistic details about how he wants the country to reach this goal. Secretary Chu has offered an overview of a very broad Clean Energy Standard (also a fact sheet) that would include a system of mandates satisfied with tradable credits for renewables, nuclear, natural gas, and clean coal technologies. But the administration has not laid out a full proposal for how those credits would be allocated or traded, because there is no sense in making a case for implementation until President Obama can convince a critical mass of the public that his goal is worth pursuing.

The President’s Clean Energy Standard is important in another respect, because it is a form of energy resource planning, a realm of energy policy that has historically been handled by the states. It’s an anachronistic and unfortunate result of our federal system that the most important decisions about the types of energy resources we will build are made on a purely piecemeal basis by state regulators and local utilities, with no coherent plan or coordination at the federal level. Part of the political appeal of carbon-pricing models is that they offer an indirect method to influence resource planning decisions without totally upending the current patchwork of state and regional decision making. But there is no reason that the federal government should not take a more active role by adopting national goals and working with states and utilities to implement strategies for meeting them.

If we are going to have a national debate about resource planning, we will need to be more specific and forthright in setting goals than the administrations broad 80 percent standard. In a recent paper released by the Progressive Policy Institute, Jim Conca and Judith Wright offer a realistic Balanced Energy Portfolio with a 30-year target energy mix of one-third renewables, one-third nuclear, and one-third fossil-fuel generation. Their target would be an ambitious departure from our current mix of 69 percent fossil fuels, 20 percent nuclear, and 11 percent renewable energy. But it is a realistic, pragmatic first step to restart a national conversation about determining our own energy future, and it provides clear goals to evaluate policy proposals.

The best hope for finding common ground in this debate is to build consensus around long-term targets for how we as a nation produce and consume energy. Once we get some agreement on the big-picture goals, we can then work on reverse-engineering specific policy proposals to achieve those goals and argue over which approach is best.


We Can Do Better on an Oil Spill Liability Cap Compromise

Posted on by The Progressive Policy Institute

Last year’s Deepwater Horizon oil spill revealed not just technological problems, but policy gaps as well. Among the most notable of these gaps is the federal limit on liability for oil spills, set at $75 million for offshore facilities. This is three or four orders of magnitude smaller than the damages associated with a major offshore spill like Deepwater Horizon, whose damages are estimated in the tens of billions. Firms that cause more damage than the limit aren’t liable, at least not under federal law. It is only BP’s decision to waive this limit that has kept it from being a much larger problem.

But we may not be so lucky next time, and the spill has greatly increased pressure to increase or eliminate the cap. I and my colleagues at Resources for the Future have written on this and, most notably, the President’s Commission on the spill recommended significantly raising liability caps. Congress could not agree on a measure to do so last year, however, and urgency ebbed in the election season. The problem still exists, however, and discussions in Congress have begun again. The latest development is a potential compromise between Democratic Sens. Mark Begich and Mary Landrieu. But unfortunately, this compromise is likely to make the situation worse, not better.

The Begich/Landrieu compromise has two elements: first, it raises the liability cap to $250 million. This is relatively meaningless given the size of large-spill damages, but let’s set that obvious objection aside for now. The deeper problems with the compromise exist even if the cap number is much higher. The second element is a kind of insurance pool, funded by contributions from all drilling firms, that would cover spill damages above the cap level.

This insurance pool creates problems that undermine any benefit from an increased cap. The first is moral hazard – liability works because, by forcing wrongdoers to pay for damages they cause, it creates incentives to avoid dangerous or negligent activity. But when liability is pooled, these incentives are blunted. Under the compromise, if a firm spilled oil that caused damage over $250 million, it would not pay much for these “excess” damages – but its competitors would. In a sense, the pool lets firms outsource the costs of their dangerous activity, and therefore erases much of the incentive to avoid it. This “moral hazard” is a recognized problem with insurance and particularly pooled insurance. There are ways to deal with it, but it is impossible to resolve it entirely.

But this isn’t the only way the compromise would kill firms’ incentive to operate safely. It would also undercut spill victims’ only real remedy under current law. Critics of the federal spill liability cap often forget that it isn’t the only game in town – spill victims can sue under state law. And with the big exception of Louisiana, state law has no liability caps at all. This means that victims can recover damages even beyond the federal cap levels. Now federal caps do still matter – for procedural reasons and due to protections offered under federal law, it is a better route for most victims. And of course Louisianans are out of luck under either law.

But if there is an insurance pool, victims won’t pursue claims under state law. No good lawyer would advise them to do so when they could just recover from the insurance pool. State liability laws would become largely meaningless, and any incentives they give firms to operate safely would fade. This makes the moral hazard problem even worse. The only remaining reasons for firms to prevent major spills would be avoiding bad press and cleanup costs (which aren’t covered under the caps). And that’s not likely to be enough to increase safety investments, as the recent spill has shown is necessary.

The spill illustrated something we probably should have recognized earlier – that our liability policy for oil spills is totally inadequate. The liability cap was too low when it was passed, and it is far too low now. There’s a very strong case that we shouldn’t have one at all.

But changes to the liability cap won’t happen without compromise. It’s a good thing that legislators continue to discuss the issue and are making such compromises (though getting Republicans on board will be necessary eventually). But whatever political benefits the Landrieu/Begich compromise has, it’s bad policy. It will make the problems with current liability policy worse, not better. The senators risk expending political capital only to make the Gulf less safe. Oil companies and the legislators that champion them may still oppose this compromise, but there will be a certain amount of Br’er Rabbit and the briar patch in their cries. Even if politics means an ideal spill liability policy is impossible, we can do better than this.

The views expressed in this piece do not necessarily reflect those of the Progressive Policy Institute.

Getting Real About Energy: A Balanced Portfolio for America’s Future

Posted on by The Progressive Policy Institute

The failure by Congress to pass energy and climate legislation has left U.S. energy policy adrift, with no clear direction or guiding concept of how we are going to address the long-term questions about the energy resources we elect to use and their impact on the environment. Rather than pursuing new approaches and policy proposals in the wake of the political defeat of cap-and-trade legislation, energy and environmental advocates have largely splintered into chaotic scrambles for subsidies or resigned their strategies to calling for increased research and development spending for energy, perhaps hoping technology can succeed in finding solutions where politics failed. Meanwhile, foreign nations continue to announce bold plans that set clear strategies for managing their future energy resources, leaving the U.S. farther behind every day in planning for leadership of tomorrow’s economy.

This paper aims to reorganize our discussions about energy and the environment around a very basic idea: the U.S. needs a new framework for identifying the goals of our energy policies and for laying out a vision of what our energy future should look like. Our current debates are too narrowly focused on incentives or regulation of specific fuels, pollutants, and technologies. We are losing sight of the forest in our fights over so many trees, and we need to take a step back and first address the broader question of where we ultimately want to be decades from now as a country and as an energy leader in the global economy. When we have an idea of the where we want to be decades from now, we can have a much more strategic and deliberate process for making policy decisions.

So what should this framework look like? By rejecting both the climate denialism and obstruction of the right and the wishful thinking and anti-nuclear biases of the far left, we outline a realistic plan to finally get the U.S. on track to a new, green economy and lead the world to a cleaner energy future. As an immediate and bold step toward setting real goals for clean and balanced growth, we propose a balanced energy portfolio that moves us toward a 30-year target energy mix for electricity generation of one-third fossil fuels, one-third renewable sources (wind, solar, biomass, hydro), and one-third nuclear generation. Such a target is an ambitious departure from our current mix of 69 percent fossil fuels, 11 percent renewable energy, and 20 percent nuclear energy. But it is doable – and setting the target is essential to serve as the polestar for all energy policy discussions.

Our balanced energy portfolio proposal is not meant to be exhaustive in its specific policy prescriptions. We offer this proposed portfolio as a framework for assessing what our needs are and for setting parameters and mileposts for policy proposals that are responsive to those needs. Such a framework is a starting point, and it will be up to policy makers to take the critical next steps by enacting meaningful policy changes that will get us there.

Read the memo

The President’s New “Better Buildings Initiative” Builds on a PPI Memo

Posted on by The Progressive Policy Institute

President Barack Obama today announced a major new policy agenda to improve energy efficiency in commercial buildings by 20 percent by 2020, and it looks like he’s been reading PPI’s memos.

Last November, PPI released a policy memo calling on the President to support commercial retrofits as a key to powering America’s economic recovery. It called for a “targeted set of short- and long-term policies to spur jobs and drive investment in retrofitting commercial buildings”. With one in four construction workers unemployed, an aggressive plan to upgrade commercial buildings will not only create jobs, but it will also make small businesses more competitive.

The President’s new Better Buildings Initiative (announced on today’s visit to Penn State University to spotlight the school’s recently developed “Energy Innovation Hub”) is a signal of support for commercial retrofits as a driver of America’s economic recovery. The White House estimates that this will generate energy savings of $40 billion by 2020 for American businesses.

To meet this goal, the President proposed a number of policy actions. The most significant is to change the existing “Energy Efficient Commercial Building Tax Deduction” into a tax credit. Currently, the tax code provides an incentive to building owners for retrofitting buildings through a tax deduction of $1.80 per square foot.

Bipartisan support for the tax deduction already exists. Recent legislation from Senators Bingaman (D-NM) and Snowe (R-ME) on energy tax incentives would increase the deduction to $3.00 per square foot. Groups such as Rebuilding America, a broad-based coalition of labor, business, utilities, manufacturers, and policy groups, support updating the commercial building tax deduction to make it more usable for existing buildings. Rebuilding America issued a press release saluting the President’s Better Buildings Initiative.

Other elements of the Better Buildings Initiative include a ramp up of energy efficiency financing opportunities for commercial retrofits, with support from the Small Business Administration; a competitive grant program at the state and local level called “Race to Green”; an initiative to encourage CEOs and universities to commit to increase the energy efficiency of their buildings, called the “Better Buildings Challenge”; and a Building Technology Extension Program.

Jones Lang LaSalle, the nation’s second-largest commercial property manager, called the President’s proposal “exactly what’s needed to jump-start major energy and carbon reduction initiatives and to create jobs and efficiencies that enhance our global competitiveness.” (A White House fact sheet is available here.)

The President’s announcement on commercial retrofits sets the stage for renewed efforts in Congress to pass clean energy legislation. This will be part of deliberations in Congress over the President’s Budget. Over the past year, energy efficiency policy has garnered the support of Republicans and moderate Democrats alike. The Better Buildings Initiative goes a long way to outline a strategy for innovation and competitiveness in America and should be supported in the debate over the President’s Budget.

Obama’s Two-Track Approach on Energy

Posted on by The Progressive Policy Institute

As often happens with State of the Union addresses, President Obama’s speech left a lot of D.C. pundits and policy types unsatisfied and complaining that he didn’t lay out enough specifics, or that he didn’t use clear enough language to endorse one policy proposal or another. And for some of the areas that he breezed through so quickly between his Sputnik references, they’re right to be hungry for more.

But one area where he did manage to send some strong signals was on energy policy. He didn’t lay out a long list of proposals here either, but he made it clear that he plans to push for an ambitious two-part energy agenda: encouraging technological innovation through research and development funding, and pursuing a strong national Clean Energy Standard (CES) that shifts our energy production away from the dirtiest categories of traditional power resources.

Supporting energy R&D isn’t really anything new for Obama, but the 80 percent CES target for 2035 is a more exciting announcement. It’s a bold attempt to take Congress again into the breach of debating a national energy plan, which requires more than relying on innovation alone. It’s a starting point for talking about what we want our mid-term future to look like, and how we intend to realistically manage our energy resources over the course of the next few decades.

One reason Obama is able to set the goal so high at 80 percent is that his definition of “clean energy” in this proposal is very broad. It goes beyond the zero-carbon category of renewables and nuclear, and includes partial credits toward the goal for natural gas and clean coal (see DOE’s fact sheet), a step that goes beyond most CES proposals that have been floated in Congress, and well beyond what many environmental advocates are comfortable calling “clean.” But Michael Levi has done an excellent job providing first-responder estimates of what the country’s generation supply would look like in 2035 under this proposal, and concluded that it’s clearly a more ambitious target than last year’s Senate bill.

In practice, Obama’s CES target is also very similar to the Balanced Energy Portfolio target for 2040 that PPI is proposing in an upcoming paper, but more on that later.

Just as the CES proposal is a new beginning for energy policy this year, Obama’s speech also signaled a new approach to framing the arguments for his proposals, both in what he said and what he didn’t say.

First, what he didn’t say: the phrase “cap and trade” didn’t come up, but that was no surprise, especially after he chose not to say much about it while it was dying a slow and public death in the Senate last year. But some of the other things he didn’t include in this speech are more interesting. He didn’t use the words “climate” or “environment” once. And no mention of global warming, carbon, EPA, or clean air. Apparently Obama not only wants to put cap and trade behind us, but he wants to move beyond the climate debate and talk about energy only in terms of innovation, competition, and clean energy jobs. With so many Republicans in the House now proudly flaunting their rejection of climate science, Obama’s move is politically understandable, even if it’s not morally commendable.

Next, what he did say: Obama’s call to arms was announcing a “Sputnik moment” for clean energy and national competitiveness, rhetoric he and John Kerry have been using a lot in recent weeks. It isn’t clear to me how they are defining this moment, but apparently my confusion is reasonable, since Obama himself wasn’t so clear on it back in 2009 either, when he sent a different message on energy [courtesy of Rachel Brown]:

There will be no single Sputnik moment for this generation’s challenges to break our dependence on fossil fuels. In many ways, this makes the challenge even tougher to solve—and makes it all the more important to keep our eyes fixed on the work ahead.

Frankly, I like Obama’s earlier message more than his new one, because I don’t really subscribe to this idea that clean energy development is a race that we are going to win or lose as a nation. However, I do think we should be taking much stronger steps than we are now to shift our energy use to cleaner resources and grow clean energy industries globally, so if Obama can make that happen by convincing Americans that a Chinese solar research center poses the same type of existential threat to our way of life as Russian rocket technology we couldn’t match in 1956, more power to him.

The best takeaway from Obama’s case for competitiveness is that we need a sustained national commitment to innovation, recognizing it as a comparative advantage we should exploit wherever possible.  This is true not only for clean energy, but for other innovative industries as well, as my colleague Michael Mandel emphasized this week. That commitment needs to be a shared effort that we value as part of our culture, with appropriate roles for the public, private, education, and non-profit sectors. It is a position that all progressives should rally around, because it’s one that will be under attack from the new goon squad of Tea Party conservatives, who want to cut most public spending just for the sake of cutting.

Just as progressives need to present a united front in support Obama’s call to defend well crafted R&D programs in the face of conservative budget roll-backs, progressives also need to raise their voices in support of his Clean Energy Standard proposal. Obama is right that investing in innovation and R&D is the key to finding long-term solutions that will be good for our economy and our planet, but innovation alone is not enough. Robert Stavins made the case last year that carbon pricing and R&D are both necessary, and one or the other alone is not enough, and I agree with his argument for the most part. And while a CES is a less efficient substitute for cap-and-trade, Stavin’s point still holds: whatever the incentive structure, we need a resource planning policy that reshapes today’s energy markets, while we wait for tomorrow’s solutions to become a reality.

President Obama deserves praise for taking a bold step toward an actual energy plan for the country, and he deserves it from all progressives. That means those of us who would prefer to see a stronger approach that includes a price on carbon, or those who are disappointed with Obama for moving too far to the center, should see the CES proposal for what it is: probably the only opportunity we have to move forward on energy resource policy in the next two years (at least), and therefore and opportunity that must be seized if at all possible. It also means that those who have advocated for innovation-only approaches need to extend their enthusiasm over Obama’s speech to support the CES together with other progressives, instead of trying to claim the mantle of leadership for themselves exclusively, as some have done this week.

Both pieces of Obama’s agenda are going to be tough to pass, and it goes without saying that they will require a better plan of attack than last year’s. There are a lot of details to be fleshed out, and some horse-trading compromises as it moves forward that won’t sit well with everyone. But the president has stepped forward this week and shown some real leadership, and progressives should return the favor as he takes the fight to Congress.

Grading the State of The Union: A Solid B+

Posted on by The Progressive Policy Institute

Last week, the Progressive Policy Institute released a Memo to President Obama, which contained 10 Big Ideas for Getting America Moving Again. How did the President’s speech match up to our recommendations?

Overall, he did quite well. Eight of our ten ideas were largely consonant with proposals included in the address, and the future-oriented rhetoric echoes the language in our memo. We also appreciate his willingness to look to both sides of the aisle to find solutions.

However, we were disappointed that he did not discuss the sluggish housing market, and that he did offer any ideas to address the roots of the partisan rancor in Washington.

Our overall grade: B+

Here’s a proposal-by-proposal scorecard:

 

1. Removing Obstacles to Growth: A Regulatory Improvement Commission

 

We proposed: A periodic review process conducted by a Regulatory Improvement Commission, modeled loosely on the BRAC Commissions for military base closures.

The President said: “To reduce barriers to growth and investment, I’ve ordered a review of government regulations.”

Analysis: The President clearly understands that we need to prune obsolete and ineffective regulations and stimulate economic innovation and entrepreneurship. But agency self-review is inadequate.

Grade: A-

2. Internal National Building: A National Infrastructure Bank

 

We proposed: Smart, innovative financing solutions that enable us to restore the backbone of our economy. A well-structured National Infrastructure Bank can play this role by leveraging public dollars with the participation of private-sector investors.

The President said: “The third step in winning the future is rebuilding America.  To attract new businesses to our shores, we need the fastest, most reliable ways to move people, goods, and information — from high-speed rail to high-speed Internet.”

Analysis: Making infrastructure one of five sections of the speech gave it real prominence. But the President needs to do more than just propose “that we redouble those efforts.”   He needs to lay out a mechanism to do that rationally, and to identify clear funding for it. A National Infrastucture Bank could accomplish that.

Grade: A-

3. A Way to Pay for High-Speed Rail

We proposed: Restructuring the Highway Trust Fund into a Surface Transportation Trust Fund that recaptures its original mission—to build and maintain an efficient national transportation network—and updates that mission to reflect 21st-century priorities, including upgrades to our passenger and freight rail systems.

The President said: “Within 25 years, our goal is to give 80 percent of Americans access to high-speed rail. “

Analysis: We applaud the President’s full-throated commitment to high-speed rail. However, he’s going to need to figure out a way to pay for it. We suggest he read Mark Reutter’s excellent memo on how to finance high-speed rail.

Grade: A-

4. Restoring Fiscal Discipline in Washington

 

We proposed: Restoring fiscal discipline in Washington by trimming the $1.1 trillion in outdated tax expenditures, capping domestic spending (including defense), eliminating supplemental defense budgets, and slowing mandatory expenditures by reducing benefits for affluent retirees.

The President said: “Starting this year, we freeze annual domestic spending for the next five years… we cut excessive spending wherever we find it –- in domestic spending, defense spending, health care spending, and spending through tax breaks and loopholes… we should also find a bipartisan solution to strengthen Social Security for future generations…we simply can’t afford a permanent extension of the tax cuts for the wealthiest 2 percent of Americans.”

Analysis: The President clearly gets the seriousness of the looming debt crisis, but understands the difference between smart cuts and needed investments. But he could have come out more strongly in favor the Fiscal Commission’s work, and he only paid lip service to entitlements.

Grade: B+

5. Setting National Targets: A Balanced Energy Portfolio

We proposed: A national Balanced Energy Portfolio with a target fuel mix allocated into thirds by 2040: one third of our electricity generated by renewable resources, one third by nuclear power, and one third from traditional fossil fuels.

The President said: “By 2035, 80 percent of America’s electricity will come from clean energy sources.  Some folks want wind and solar.  Others want nuclear, clean coal and natural gas.  To meet this goal, we will need them all — and I urge Democrats and Republicans to work together to make it happen.”

Analysis: The President is thinking big, but also recognizing that nuclear and natural gas need to be part of any energy mix.

Grade: A

6. Greening the Pentagon: An Energy Security Innovation Fund

We proposed: An Energy Security Innovation Fund, housed in the Pentagon, to help companies bridge the gap. Such a fund would leverage public dollars with private money to support research and deployment of the most promising green products.

The President said: “We’re telling America’s scientists and engineers that if they assemble teams of the best minds in their fields, and focus on the hardest problems in clean energy, we’ll fund the Apollo projects of our time.”

Analysis: The next clean energy breakthrough is going to require support from the government. But Obaa should look beyond the Department of Energy and recognize that the military can be a fertile source of innovation, too.

Grade: A-

7. Bringing Public Education into the 21st Century

We proposed: To radically transform public education by growing charter schools, ending teacher tenure as we know it, spurring a network of “Innovation Zones”, and creating a “Digital Teacher Corps”.

The President said: “Our schools share this responsibility.  When a child walks into a classroom, it should be a place of high expectations and high performance.  But too many schools don’t meet this test.”

Analysis: Education is clearly the key to our ability to “win the future,” and the President understands this. We support his Race to the Top program and the call for more bright young people to go into education. But we also hope he thinks more creatively about radical new ideas for 21st century education, embracing the possibilities of charter schools, digital education, and “innovation zones.”

Grade: A-

8. Lifting Housing Markets: One Million Homeowner Vouchers

We proposed: An innovative way to jump-start the housing market would be for the federal government to provide a million vouchers that allow low-income renters to become homeowners.

The President said: (Nothing)

Analysis: Surprisingly, the President failed to mention the sluggish housing market, which many economists believe is one of the leading factors holding back an economic recovery.

Grade: F

9. Align Innovation and Immigration

We proposed: Aligning innovation and immigration by providing a citizenship path for foreign students with advanced technical degrees and illegal immigrants’ children who are interested in national service.

The President said: “I strongly believe that we should take on, once and for all, the issue of illegal immigration… I know that debate will be difficult.  I know it will take time.  But tonight, let’s agree to make that effort.  And let’s stop expelling talented, responsible young people who could be staffing our research labs or starting a new business, who could be further enriching this nation. “

Analysis: The President deserves points for having the courage to bring up immigration reform. But he clearly gets it: our global competitiveness depends on continuing to be a magnet for the world’s best and brightest.

Grade: A

10. Taking Power from Special Interests: A Fair Way to Finance Elections

We proposed: A hybrid Fair Elections system introduced by Sen. Dick Durbin (D-Ill.) to allow federal candidates to choose to run for office without relying on large contributions by using federal money to match small donations.

The President said: (Nothing)

Analysis: Campaign finance reform is not on the agenda, and the President does not seem particularly interested in putting it there. This is too bad. A great way to break the partisan rancor in Washington would be change the way politicians get elected to office. As long as congressional campaigns are privately funded, and as long as the big donations come primarily from ideologues and special interests, pragmatic candidates are going to have a tough time raising the resources they need to get started, and a difficult time winning in all-important low-turnout primaries.

Grade: F

Conclusion:

Overall, it was a great speech. It laid out the problems that we face as a nation, and provided a vision of an America that invests smartly in the future, building infrastructure, providing educational opportunities, and remaining a magnet for the best and brightest in the world, and all in a way that could move us past partisan divides.

The Right Growth Formula

Posted on by The Progressive Policy Institute

The specter of economic decline is haunting America. President Obama seeks to banish it by making jobs and U.S. competitiveness the centerpiece of his State of the Union report to Congress tomorrow. This sets the stage for a critical contest between dueling theories about how America can get its economic mojo back.

Over the weekend, Republicans flooded the media with preemptive strikes against Obama’s expected calls for boosting public investment to spur growth. “With all due respect to our Democratic friends, any time they want to spend, they call it investment, so I think you will hear the president talk about investing a lot Tuesday night,” GOP Senate leader Mitch McConnell told “Fox News Sunday.” “This is not a time to be looking at pumping up government spending in very many areas.”

True to form, Republicans have a very simple theory for rekindling jobs and growth: Cut federal spending. That’s why they’ve tapped their leading fiscal hawk, House Budget Committee Chairman Paul Ryan, to respond to Obama’s speech. And Rep. Michele Bachmann will offer an unofficial, “Tea Party” riposte to the President online.

Now, I’m all for fiscal discipline. I’ve chided progressives for posing a false choice between deficit reduction and economic growth. Restoring fiscal stability is an essential ingredient of any credible plan for robust growth.

But cutting spending by itself won’t help us rebuild our infrastructure (which is the foundation for productivity), strengthen our comparative advantage in science and technological innovation, or produce a highly skilled workforce. As virtually all serious economists recognize, these are tasks for government.

Yet today’s Republicans are so besotted by anti-government populism that you can’t even count on them to be good capitalists anymore. Perhaps conservative think tanks should organize seminars to reacquaint House Republicans with Adam Smith, whose defense of laissez faire economics did not blind him to government’s responsibility to supply public goods like roads, ports and education. As he wrote in the Wealth of Nations:

The third and last duty of the [government] is that of erecting or maintaining those public institutions and those public works, which, although they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could not repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.

As PPI maintains in Getting America Moving Again, a new Memo to President Obama, it will take both more public investment and more dynamic markets to reinvigorate our economy. We need to boost spending on research and commercialization of new inventions. We also need to boost spending on modernizing the nation’s transport and energy infrastructure – for example, by building high speed rails and smart grids that can accommodate clean energy generation. This can and must be done within a new framework for restoring fiscal stability that cuts tax expenditures, caps spending on defense and domestic programs, and most importantly, slows the unsustainable growth of the big entitlement programs.

At the same time, we also need to revamp archaic tax and regulatory policies that dampen incentives for economic innovation and entrepreneurial risk-taking. To that end we have proposed a base-closing style commission charged with culling the accumulation over time of burdensome rules and regulation.

In truth, neither party’s economic orthodoxies are equal to the challenge facing our country. That’s why President Obama needs to challenge both sides tomorrow to unite behind a bold plan for a national economic resurgence.

What’s Next For Climate Change Policy?

Posted on by The Progressive Policy Institute

The new Congress is now in session, with a large GOP majority in the House and a much diminished Democratic majority in the Senate; the prospects for serious climate change legislation in the U.S. are dimmer than ever. The Republican Party has largely turned its back on science and its own conservative ideas (remember, McCain was a champion of cap and trade back in 2008), and because of the profound climate denialism of the Tea Party movement even once reasonable Republicans are now turning their backs on the overwhelming scientific evidence, and the many ways comprehensive climate policy is good for the overall economic and security interests of the nation. (To be fair, there are a few Democrats in fossil-fuel dependent states that are also opposing new climate measures, such as Senators Rockefeller and Manchin of West Virginia.)

But not all is bleak; there are still a number of reasons to be mildly optimistic that significant progress can still be made in the run-up to the 2012 elections.

  1. The EPA is set to roll out new regulations on greenhouse gas emissions from power plants, which have the potential to reduce greenhouse gas emissions from the power sector by a few percentage points over the next few years. The rules will make coal generation less economically viable, and likely spur new development in less greenhouse gas-intensive sources, such as natural gas, in addition to renewable sources. I highly recommend the work by David Roberts at Grist for details on the EPA’s actions and their consequences. On January 13th the EPA revoked the permit for a massive mountain-top removal coal plant (which had been approved by the Bush Administration in 2007), signaling that the agency is prepared to put an end to the industry’s controversial practice.
  2. The Obama Administration has given the okay for a host of huge new solar plants on federal lands and gone a long way to streamlining the process by which such plants can be built. By reducing bureaucratic hurdles and red tape for large solar installations, we are likely to witness a large increase in mega-solar plants. Aside from the higher cost of solar (relative to fossil fuel), the biggest hurdle to widespread adoption has been the huge time lags and transaction costs in the permitting process; the Administration’s moves go a long way towards decreasing these barriers. The economies of scale of these plants will likely lead to significant cost reductions, making solar much more competitive in the near future. It’s important to note that these solar plants mostly rely on solar thermal technology―an 18th century technology using mirrors to heat water and produce steam, which powers a turbine―that is fast-becoming the low-cost solar alternative.
  3. The announcement by Google that it will invest $5 billion in a massive electricity transmission line in the Atlantic will help spur the development of massive wind farms off the Eastern seaboard. These hold tremendous potential and could one day provide most or all of the power for many of the East Coast’s major cities.
  4. The G-20 is moving forward with its plan to eliminate or severely reduce fossil fuel subsidies in the “medium” term. This is extremely difficult to accomplish politically, given both the entrenched interests who will lose billions and the effect on consumer prices, but even a slow and steady removal of these subsidies will help to tilt the energy mix towards less greenhouse gas-intensive forms of energy and decrease overall emissions.
  5. California is finally moving forward with its climate legislation AB32, as the final challenges to the law have been defeated. While the legislation doesn’t go into effect until 2012, it is the most progressive and far-reaching climate change policy in the world and the results are likely to be extremely consequential for the nation, and ultimately any future international climate change regime. California is the world’s 8th biggest economy so if comprehensive climate change legislation can work here it will prove a global model; according to UC-Berkeley Professor Peter Berck AB32 is likely to lead to a net increase in jobs in California because of the major energy efficiency improvements that the legislation will force into action. We will soon see if these optimistic predictions are borne out by the reality on the ground.
  6. In 2010 private investment in green energy soared to a record high, and with the global economic recovery gaining momentum oil prices are likely to keep rising, providing additional economic incentives for alternatives. To date, much of this green investment has been outside the U.S. because of the failure to pass comprehensive national policy, but there is still time for the U.S. to catch up if we can get serious.
  7. Significant progress was made in the recent COP16 meetings in Cancun, with the major developing country emitters agreeing to verification of their emissions reductions in the future. Steps were also made to begin the implementation of the major forest carbon program, REDD, which has the potential to provide a cheap path to effective carbon emissions, while also preserving much of the world’s remaining forests.

As I detail in my new book, What Environmentalists Need To Know About Economics, the theory, facts, and ingredients for good policy, are on the side of those who want to take an aggressive and forward-looking approach to global climate change (and other critical environmental issues); hopefully, the intellectually honest and serious Republicans and conservatives will pressure the GOP to return to its pro-environmental roots and become constructive players in the national conversation. More on this soon.

Congress vs. The EPA, Round II

Posted on by The Progressive Policy Institute

Everything old is new again. Around this time last year, the Environmental Protection Agency (EPA) was in the process of issuing major rules that would lead to regulation of greenhouse gases under the Clean Air Act (CAA). Many in Congress opposed these moves, and sought to delay or halt them. I wrote about these attempts in this space (here, here, here, and here) and, as I predicted, they failed—none reached the President’s desk.

But failure has not stopped EPA opponents from trying again. Since last year, some things have changed. The EPA has moved forward with regulation, implementing GHG-related permitting requirements for new and modified emitters, and announcing in December that it plans GHG emissions standards for existing power plants and refineries. But none of these moves are surprising—the EPA is not pushing any harder now than it was last year.

But of course the 2011 Congress is different from the 2010 version, particularly since Republicans now control the House. Will this Congress be able to derail the EPA?

Maybe. It depends, not just on politics, but on what avenue of attack Congress chooses. This choice will probably be made first in the House, where new Energy and Commerce Committee Chair Fred Upton (R-Mich.) will set the agenda. Four broad options are on the table. Last year, each of the first two options were pursued. All four are likely this year. Let’s briefly look at each in turn.

1) New legislation: Congress could simply pass a law modifying EPA authority. Proposals range from a short delay in EPA GHG authority to removing GHGs from the CAA entirely, effectively overturning the Supreme Court’s Massachusetts v. EPA decision.

While Republican control of the House does smooth the path of new legislation somewhat, the Senate and above all the President remain significant barriers. While modest legislation, such as a delaying bill, is likely to attract some Democratic support, it will need 60 votes to pass the Senate. Even then, President Obama is certain to veto any legislation restricting EPA authority. It seems very unlikely that any such bill could attract a veto-proof majority.

2) Congressional Review Act: Congress has the authority to cancel any regulatory action with specific legislation. This authority is only available for 60 days after the regulation is formally issued, however.

 

CRA resolutions do not require 60 votes to pass the Senate. This is relatively little help, for two reasons. First and most obviously, the President will likely veto any resolution. Furthermore, almost all of the significant GHG rulemakings made by the EPA were issued well over 60 days ago, and cannot be rescinded by CRA resolution anyway.

3) Appropriations: Congress may choose not to fund EPA programs, even if they remain legally permissible (or even required).

 

Congress has not yet passed a budget for 2011, so this Congress will need to pass two over the next year. This gives ample opportunity for restricting EPA funding. The appropriations process is ultimately subject to the same procedural requirements as other legislation, so any budget will have to pass the Senate and be signed by the President. Defunding the EPA makes either far less likely — but unlike EPA-specific legislation, the politics are hard to predict. The budget process always involves compromises. How hard are EPA’s opponents and supporters willing to fight? If Congress does pass a budget that defunds agency GHG regulation, would the President veto it – risking a government shutdown?

4) Oversight: Even if none of the above is possible, Congress’s (or often individual committee’s) subpoena power can be used to investigate and, in practice, slow EPA action.

 

While oversight measures cannot alter EPA’s legal authority, they can make regulatory life very difficult. Since individual committees can conduct hearings and investigations, there is relatively little to stop motivated members of Congress from targeting the EPA with these tools. They are unlikely to stop any regulatory program, but they will be a drain on agency resources and energy.

In short, I don’t think headline-grabbing moves to alter EPA legal authority over GHGs are much more likely of success this year than last. That’s unlikely to change until and unless there is a change in the White House. These kinds of bills are more politics than policy; I doubt their supporters really think they will pass. Instead they allow members to make statement votes, and force EPA supporters to make votes that may be used against them later.

But the appropriations process and Congress’ oversight powers are both real, though different, threats to EPA regulation. Budget negotiations this year are likely to be acrimonious, and the EPA is a small pawn in a bigger game. If EPA opponents make defunding the agency a priority, they may be able to achieve it by doing so in an otherwise-palatable budget that the President determines he cannot afford to reject. In this sense, the relative political unimportance of the EPA works to its advantage — will Republicans in the House choose defunding the agency as their line in the sand, over other measures with much larger fiscal impact? This seems unlikely, but certainly not impossible.

Committee oversight presents a different challenge to the EPA. Some level of Congressional interference is certain, but its extent probably depends greatly on the agency’s ambition. If the EPA fears Congressional subpoena, it is less likely to regulate strongly or creatively. Instead, it may slow-walk some measures, and scrap others. Unfortunately, this may have the perverse effect of making regulation less efficient, rather than simply leading to less regulation. If agency resources are stretched (because of Congressional demands, underfunding, or both), it is less able to do careful analysis. If the agency makes avoiding controversy a paramount goal, it is less likely to try innovative approaches (such as tradable GHG performance standards) aimed at more efficient regulation. An EPA that does the minimum required by law might be more costly to the economy, not less.

This piece is cross-posted at Weathervane