Climate change regulation without Congressional action?
Invoking a rarely exercised authority, President Barack Obama recently directed the Environmental Protection Agency to require states to establish plans to reduce greenhouse gas emissions from existing power plants by June 2016.
The president’s directive appears to be a clear endorsement of the policy and legal justifications advanced by the Natural Resource Defense Council in a 2012 report aimed at cleaning up what it labeled as “America’s biggest climate polluters.”
In broad terms, the report calls for the EPA to:
- Establish increasingly more stringent state-by-state greenhouse gas emission targets for electric power generation as early as 2020.
- Require individual states to submit to state implementation plans to achieve these targets.
- Utilize various tools, such as mandates for shifting from coal to gas generation, mandates for renewable energy, or carbon credits and trading, to achieve the targets.
For a state like Michigan, which relies heavily on coal for electric power generation, meeting the targets will require construction of new gas-fired or nuclear power plants or renewable power assets such as wind or solar or new transmission to import less carbon-intensive electric power into the state.
The costs for these changes will, of course, have to be paid for by the electricity ratepayers in this state.
That’s a potential problem for businesses in Michigan. According to the Energy Information Administration, Michigan already has the highest electric rates in the Upper Midwest, and our rates are also higher than the national average. The costs of meeting the GHG emission targets could further increase this rate disparity.
Since the U.S. Supreme Court held in 2007 that GHG emissions could be regulated under the broad authority of the Clean Air Act, the U.S. Congress has failed to put into place any meaningful legislation that directly addresses GHG emissions.
This failure to reach consensus on whether and how to regulate GHG emissions from any sector of the economy, including the utility sector, has left a void, which the president has directed is going to be filled by the EPA.
If the EPA’s proposals track the NRDC’s, Michigan is going to be asked to submit state rules demonstrating how it is going to reduce the GHG footprint of the electricity supplied in the state.
Michigan state law currently empowers the Michigan Department of Environmental Quality to establish such rules when required by federal rulemaking. As a consequence, the future size and mix of electric power generation in Michigan may be subject to regulation by the MDEQ. This may present challenges in coordinating the MDEQ’s regulatory actions with the traditional utility regulation of the Michigan Public Service Commission.
However, the past 35 years under the Clean Air Act demonstrate that policies implemented through EPA rulemaking are subject to the vagaries of each new administration and constant partisan litigation over whether the EPA has exceeded or underutilized its authorities.
It is guaranteed that any set of rules adopted by the EPA will be attacked in the courts. An inevitable consequence of such litigation is uncertainty, potentially extending into the next decade. The question has to be asked: “Is this any way to plan for and assure America’s energy future?”
Steven C. Kohl is a partner at the law firm Warner Norcross & Judd LLP who concentrates his practice on the federal Clean Air Act and state air pollution control laws. He can be reached at email@example.com.