Despite the recent retrenchment of the United States from its commitments under the Paris Agreement, the USA is indispensable to international efforts to address climate change. We remain the second largest emitter of greenhouse gases in the world.Footnote 1 Historically, we are the largest emitter.Footnote 2 In order to contribute to global efforts to limit temperature increases to 2°C or less, the United States will need to transform its electricity and transportation sectors in the coming decades, with other parts of the economy to follow.Footnote 3 Electricity and transportation in combination emit more than half the country’s carbon dioxide, the most common greenhouse gas.Footnote 4 Their transformation will need to occur over the next four and a half decades (roughly the life of the forty-nine-year-old Clean Air Act) and will require massive shifts in the fuels we use to power our businesses, industry, government and homes and to propel our cars, trucks, trains, ships and planes.Footnote 5
In designing public policy, analysts often focus on criteria such as efficiency and distributional fairness. These are important attributes of good policy design, and in the climate and energy context we have seen significant attention paid to them. Our focus in this book is, nevertheless, different. Our claim is that despite the recent pause in US efforts to reduce emissions, the United States will need to return to aggressively regulating its greenhouse gas emissions. And in doing so, we will need well-designed energy policy that will need to be not only efficient and fair but also durable in order to achieve substantial reductions in greenhouse gas emissions by midcentury. Most centrally, we will need durable energy policy to motivate the substantial private-sector investment in long-lived energy infrastructure that will be necessary to transform our energy system.
Durability alone, however, will not suffice. We also need our policies to be adaptable – to incorporate and respond to new scientific, technological and economic information. Without policy that endures and yet evolves, we will not achieve the long-term transformation in our energy systems that is crucial to stabilizing the earth’s temperatures.
Finally, policies to reduce greenhouse gases also need to be as flexible as possible. Flexibility eases the burden of compliance by drawing on emitter knowledge and experience to help determine how best to reduce emissions and by reducing the economic costs of doing so.Footnote 6 Addressing climate change will be the most expensive and far-reaching environmental effort in history. Flexible policy is likely to improve cost-effectiveness, which can, in turn, speed up emissions reductions, improve the fairness of climate policy and contribute to its political durability.
The Clean Air Act (CAA) is currently the central policy tool for regulating greenhouse gases (GHGs) from the energy sector.Footnote 7 Its use is in many respects by default: efforts to pass comprehensive federal climate legislation have failed, and given the current political climate, these efforts are moribund.Footnote 8 And the Environmental Protection Agency’s (EPA) regulation of GHGs under the CAA is the result not of an affirmative choice by the agency but in response to a series of lawsuits that have forced EPA to regulate emissions from a variety of sources.Footnote 9 The Trump administration’s posture toward regulating GHGs under the CAA is dramatically different from its predecessor under President Obama. It includes rolling back the Clean Power Plan, which was the Obama administration’s program to regulate the electricity sector and a centerpiece of the nation’s climate policy submitted as part of its commitment under the Paris Agreement.Footnote 10 A recent proposal, not yet finalized, would also freeze combined GHG emissions and fuel economy standards for passenger automobiles and revoke California’s authority to issue its own standards.Footnote 11 Yet, unless Congress eliminates EPA authority to regulate GHGs, the agency will nevertheless be legally required under the CAA to issue new sets of regulations.Footnote 12
The CAA is, in many respects, a remarkable statute. Over its almost fifty-year history, the CAA has resulted in large reductions in harmful air pollutants. These reductions have occurred across all areas of the country, across a wide range of pollutants and from a huge number of sources, including in the electricity and transportation sectors, which must be at the heart of long-term climate and energy policy.Footnote 13 In many respects, the CAA has been at once durable – in that it has continued to produce reductions in air pollution over the course of its long life and has long outlasted the political coalition that led to its adoption; it has been adaptable – in its ability to respond over time to changes in economic, technological and scientific information; and it has been flexible – through the use of incentive-based regulation in lieu of prescriptive regulations in many cases, which has enabled greater pollution reductions at lower cost. To give two examples, the CAA is responsible for the virtually complete elimination of lead over a two-decade period from the transportation sector, leading to widespread public health benefits.Footnote 14 This was accomplished through durable but evolving regulations that became increasingly stringent in response to an emerging scientific consensus about the effects of leadFootnote 15 and ultimately employed a flexible market-based approach to achieve the virtual elimination of lead in gasoline.Footnote 16 Second, the CAA is responsible for dramatic reductions in fine particulate matter,Footnote 17 again through regulations that adapted in response to new scientific information. The harmful effects of particulate matter were not widely recognized until the 1990s, after the last major amendments to the CAA.Footnote 18 Once the harmful effects became clear, EPA exercised its mandate to protect human health by naming fine particulate matter as a regulated pollutant and then implementing reductions through regulations that encompassed both flexible and prescriptive approaches.Footnote 19
Both because of its centrality in environmental regulation and because the CAA is now being used as the principal means for regulating US GHG emissions, this book makes the CAA its centerpiece. Our aim is to determine whether and how the CAA has exhibited durability, adaptability and flexibility – or failed to do so – and to draw lessons for what the CAA can tell us about how policymakers can incorporate mechanisms to ensure a long-lasting but evolutionary and cost-effective approach to cutting GHGs to almost zero. We believe our analysis is helpful not only at the federal level but also for state policymakers focused on regulating carbon emissions from their transportation and electricity sectors and ultimately buildings and industry.
Each of the next five chapters focuses on important features of the CAA: the National Ambient Air Quality Standards (NAAQS), the regulation of stationary sources, the regulation of mobile sources, the regulation of transportation fuels, and the use of market mechanisms across a number of the CAA’s programs. In each chapter we set forth and describe in detail the principal regulatory mechanisms used in the program. We then evaluate each program to determine whether and how, through its regulatory means, each has been durable across the life of the statute yet nimble enough to respond to changes in new information about air pollutants, technologies to reduce them and science about the health and welfare effects of air pollution exposure. Moreover, we consider whether the regulations allow for flexibility in implementation and whether the regulatory approach has either enhanced or inhibited compliance.
In this introductory chapter, we set forth and define a series of concepts and features that each of the subsequent five case studies uses to frame and analyze the program on which the chapter focuses. We also provide a general overview of the major provisions of the CAA in order to put each of the chapters into context. We also begin to tease out common themes and issues that emerged from the chapters but save for the conclusion a lengthy discussion of the lessons we have collectively learned from the CAA about how to design durable yet adaptable and flexible energy and climate policy.
We begin with a discussion of the central concepts on which we focus: durability, adaptability and flexibility. We describe why we believe these attributes are so crucial to climate and energy policy and what we mean in using the terms.
1.1 Why Durability, Adaptability and Flexibility?
The transportation and electricity sectors, as well as buildings and industrial facilities, are infrastructure intensive and involve large capital investments that often last many decades. We have power plants in the United States that were built over seventy years ago.Footnote 20 The average age of our nuclear fleet is approaching forty years.Footnote 21 Cars built today can last for 150,000 miles or more with a typical age of 15 years,Footnote 22 heavy-duty trucks may stay on the road for thirty years and our rail cars, ships and airplanes remain in operation for decades.Footnote 23 In order to incentivize innovations in all these capital-intensive industries to produce low or zero GHG emissions by midcentury, it seems almost self-evident that we need stable, durable policies across multiple decades. Stability and durability in policy will provide the signal necessary to investors and innovators to develop technologies and systems that can help accomplish our long-term emissions goals. Stability and durability will also reduce the attendant risk that accompanies investments in the research and development of these technologies.
By stability and durability, however, we do not mean that a policy must be fixed for the next forty-five years. Instead, by durability, we mean a policy framework that continues to accomplish the objectives for which it was adopted. In political terms, we argue – borrowing from the work of our colleague Eric Patashnik – that a durable policy is one that remains effective after the coalition that led to its adoption no longer exists or no longer holds the reins of power. The policy, in other words, outlasts its initial supporters. And the policy must accomplish its goals even in the face of changes in scientific knowledge, in technological innovation, and in economic change.Footnote 24
In order to last and maintain its effectiveness for multiple decades, a durable policy must also, then, include mechanisms to adapt to new information about science, technology and economics. We do not, in other words, mean by durability that a policy should remain the same across many years. The world will not remain static over the next several decades; indeed, the rapidity with which the electricity and transportation sectors are transforming both technologically and economically is already outpacing predictions of just a few years ago. But the methods to adapt policy to new information must, we believe, be themselves predictable in order to provide clear signals to regulated industries that policies will change. Put a different way, we need durable yet evolving policy that – through its adaptive mechanisms – is predictable.
We recognize that developing policy that exhibits both durability and adaptability may seem contradictory. Yet predictability through regularized administrative processes that allow an agency to adapt to new information can harmonize the two concepts. By anticipating the need for policy to adapt within the domain of an expert agency, the CAA has in many respects provided for this regularized process. Regulated parties are on notice that the CAA will adapt, but only with significant lead time, with an opportunity for broad public participation and with the input of sophisticated scientific and technical experts. This attention to process, we believe, is one key to the CAA’s success: if a policy changes in a way that is not predictable or is not in accord with legal and administrative processes, it is unlikely to provide the stable, durable signal that investors need to make long-term capital commitments. Although one might expect Congress to provide this adaptive response, historically, legislative guidance has occurred only rarely. The modern CAA has been significantly amended only twice since its adoption in 1970 and not at all since 1990.Footnote 25
Flexibility adds a third element to many successful policies. Major environmental transformation involves the turnover of industrial, commercial and residential capital that takes years. Assuming that the entire economy is not going to shut down until that happens, it is meaningful to ask: what entities are going to make which investments and when? This is a challenging question for regulators, who typically cannot observe the distribution of emissions reduction opportunities and their costs from among a large number of entities that must comply with regulation. Regulators want to get the biggest bang for the buck out of regulations that impose costs on the economy but often lack complete knowledge about where to find the biggest bang. In response to this challenge, the CAA has indeed adapted, through trials in regional offices and ultimately through national programs, to find ways to introduce flexible approaches to regulation. A flexible approach will provide incentives to a group of regulated entities to reduce emissions, rewarding individual entities that can reduce the most and operate most cleanly while calibrating the overall effort to meet environmental goals.
We see in the following chapters that flexibility has been a key ingredient of some of the most successful regulations under the CAA. However, we also see cases where it has undermined environmental outcomes and threatened the durability of some initiatives.
One example in the CAA that ties these three concepts together is the Acid Rain Trading Program, which incorporated an emissions cap that declined in two phases combined with emissions trading among regulated entities.Footnote 26 This innovative, flexible approach was the political lynchpin to the Acid Rain Program because it promised to achieve the scientifically informed environmental goal at less cost than would mandated specific measures at specific power plants.Footnote 27 However, once the second phase was completed, the program essentially collapsed because it failed to continue to adapt to new scientific and economic information and technological changes.Footnote 28
The five CAA case studies that follow have identified a number of means to incorporate new information into long-term policy. Not every section of the CAA contains all these mechanisms, although some apply to the entire Act. Instead, our authors discuss the ways in which a variety of these mechanisms promote – and in some cases undermine – flexible, adaptable, yet durable policy. These mechanisms include requirements that EPA periodically engage in the revision of standards;Footnote 29 cooperative federalism arrangements with shared responsibility between the federal government and states;Footnote 30 formal procedures and processes that push EPA to carry out its statutory duties, including citizen suits,Footnote 31 petition processes and notice and comment;Footnote 32 expansive definitions in the Act – such as air pollutant – that allow the agency to regulate new pollutants;Footnote 33 technology-based standards that by definition incorporate evolution into them (terms such as best and lowest);Footnote 34 automatic tightening of targets, such as in the two phases of the Acid Rain Trading Program;Footnote 35 and the incorporation of sophisticated personnel, including scientists and economists, into EPA and its advisory boards.Footnote 36 In some instances, however, programs in the CAA have either failed to adapt, as is the case of the Acid Rain Trading Program in its failure to require reductions in sulfur dioxide beyond the two stages included initially in the program’s provisions,Footnote 37 or adapted too frequently, as in the case of the Renewable Fuel Standard with its requirement that EPA establish a new target each year for the amount of renewable fuels that refiners must produce.Footnote 38 This apparent excess of adaptability resulted from the inability of Congress to anticipate technologically feasible goals.
Our authors have also examined the interactions among a variety of branches of government, including Congress, the executive (principally EPA), the judiciary and the states in pushing the evolution of air pollution policy. One notable finding is that Congress played a crucial role in the first two decades after the CAA passed in amending portions of the Act that either weren’t working well or were too ambitious. A key example was recognizing that establishing health-based standards for hazardous air pollutants, as required by the 1970 CAA, was simply not working. Instead, Congress replaced the health-based approach with a technology-based one in the 1990 amendments, leading to a flurry of successful regulatory activity. The lack of congressional involvement in adapting to new circumstances in the subsequent two and one-half decades (with the exception of amendments to fuels programs) has hampered EPA efforts to address remaining pollution problems. A notable example of a policy that would have benefited from congressional clarification is EPA’s attempt to regulate interstate air pollution by using flexible market mechanisms. Had Congress clarified the agency’s ability to do so EPA could have designed better programs, implemented more quickly and cost effectively and with less court involvement.
Another important finding of several of the chapters is the key role states have played in pushing the evolution of the statute. The best-known example is California’s unique role in regulating emissions from mobile sources and fuels and decisions by other states to adopt California’s standards. Other important instances include the innovations some states have produced in regulating new stationary sources under the Prevention of Significant Deterioration and Nonattainment programs and the role the Ozone Transport Commission played in forcing EPA to address cross-border ozone pollution.
1.2 Why the Clean Air Act?
We have already explained some of our reasoning in studying the CAA to determine whether and how it has been both durable yet flexible. We elaborate here.
Environmental Performance.
First, the CAA has produced tremendous environmental results over its nearly five-decade history in reducing ambient air pollution. All six of the pollutants covered by the NAAQS have declined significantly. Carbon monoxide is down 86 percent on average nationwide. Lead has declined 99 percent. Nitrous oxide has declined 59 percent and sulfur dioxide 84 percent. Ozone, which remains one of the toughest pollutants to control, is down 32 percent. And in the fifteen years since EPA began regulating fine particles (PM2.5), concentrations have fallen 37 percent.Footnote 39 All these declines have occurred while the US economy has grown dramatically (by sixteen-fold since 1971)Footnote 40 and population has increased by 150 percent.Footnote 41 These pollution figures are national averages from all sources for the most ubiquitous pollutants. The chapters on individual programs within the CAA that follow provide more granular data, but the overall conclusion is a powerful one: the Act has produced enormous environmental benefits. The United States will need to achieve similar declines in GHG emissions over a roughly similar period of time, by midcentury, making the CAA an important statute to study.
Regulatory Diversity.
Another important feature of the CAA is its embrace of a variety of regulatory tools. The centerpiece of the Act is, of course, the NAAQS, which set ambient, health-based standards for ubiquitous pollutants.Footnote 42 But the NAAQS program is administered through a system of cooperative federalism that harnesses the states to implement and enforce the standards, an innovative arrangement that merits study.Footnote 43 Moreover, many sources are subject not to health-based standards but to technology-based ones. So are many pollutants, including hazardous air pollutants.Footnote 44 The CAA’s system of regulating mobile sources is perhaps the most unusual, setting national standards while designating only a single state, California, to set standards more stringent than any federal standards and allowing other states to opt into those standards or follow the federal ones.Footnote 45 The Act is also not confined to relatively prescriptive regulatory tools (sometimes referred to as command and control). It also includes a large number of flexible market-based programs, from the regulatory approach that led to the removal of lead from gasoline, to the control of interstate air pollution embraced in Title IV’s Acid Rain Trading Program, to the control of cross-state air pollution first through a regional state effort via the Ozone Transport Commission and later expanded to encompass the eastern half of the country.Footnote 46 And the CAA embraces strong citizen participation through a broad authorization of citizen lawsuits against EPA and the inclusion of important procedural and venue provisions.Footnote 47 Indeed the CAA was the first federal statute to include a citizen suit provision.Footnote 48 This regulatory diversity provides a rich basis to study the ways in which durability and adaptability are promoted and/or undermined through the Act’s many tools and for understanding the cases where flexible approaches have worked well. Our chapters reflect this diversity.
Notable Shortcomings.
The CAA is far from perfect. Several of its provisions and programs have something to teach us from their failures, not their successes. These include well-known failures such as the exemption of many existing sources from requirements to reduce emissionsFootnote 49 and less well-known failures such as the fact that the boutique fuels program has produced virtually no emissions reductions.Footnote 50 Because the CAA is so far reaching across so many pollutants and sources, it seems virtually inevitable that some of its provisions are ill advised or unsuccessful; some have incurred costs with little in the way of associated health or environmental benefits. Examining these failures for what they can tell us about how not to design durable yet adaptable and flexible policies is at least as important as examining the CAA’s many successes.
Regulation of Carbon-Intensive Sources.
Many of the largest sources of GHG emissions are also among the largest sources of air pollution. As we have already described, the transportation and electricity sectors contribute more than half of US carbon dioxide emissions.Footnote 51 Refineries, chemical plants and other major air pollution sources also contribute a significant amount.Footnote 52 It makes sense to examine how the CAA has or has not been durable, adaptable and flexible when applied to the very sources from which GHGs will need to be regulated.
Ability to Withstand Political Change.
The longevity of the CAA also demonstrates one of its rather remarkable accomplishments: it has endured through significant ideological and political change as the country has elected both Republican and Democratic presidents throughout the statute’s long history. The CAA was first enacted with broad bipartisan support and signed into law by a Republican president (Nixon), saw major amendments in 1977 under a Democratic president (Carter) and then underwent another round of major amendments in 1990 under Republican President George H. W. Bush. Throughout the forty-nine years since its passage, very different administrators with very different ideological predilections have led the implementing agency. We have recently witnessed another dramatic ideological shift, from eight years of aggressive environmental activism to a period of administrative retrenchment. Yet many of the features of the CAA – from federalism arrangements to statutory deadlines to citizen suits – will likely mean that the statute will continue to move forward.
Comprehensive Coverage.
Finally, the CAA is interesting to study in part because it is so comprehensive. This comprehensiveness manifests in several ways. The CAA contains broad definitions that extend its coverage as information emerges about the harmful effects of pollutants. It contains multiple and sometimes overlapping methods of regulating sources of pollution so that few sources escape its reach. The CAA uses more than one level of government to regulate, which can promote innovation and provide something of a regulatory backstop if one level of government is underutilizing its powers. It gives a large role to private parties, who can participate via citizen suit, notice and comment and petition. The Act provides an expert agency, EPA, with broad powers through delegation, but also for some programs it requires EPA to act through regulatory deadlines. In some instances, after experience showed that a grant of delegated power to EPA (or in some instances to the states) had proved too broad, Congress has stepped in and regulated more directly. Some parts of the CAA, then, are very prescriptive.
Chapters 2 through 6 provide remarkably detailed and in-depth analyses of individual programs within the CAA. They are invaluable in examining how these individual programs promote or undermine durability, adaptability and flexibility, and we describe them next. In our concluding chapter, we step back and look at these programs collectively, keeping sight of the comprehensiveness of the CAA and drawing lessons from the chapters as we look to future pathways for the development of energy and climate policy.
1.3 Living Examples in the Clean Air Act
Chapter 2, by law professor William Boyd, focuses on the NAAQS to show the ways in which the centerpiece of the CAA has produced significant pollution reductions of major pollutants across multiple decades. This chapter also sets the stage for those that follow given the centrality of the NAAQS in the way the CAA operates. Chapter 3, by law professor Hannah J. Wiseman, then examines the regulation of factories and industrial plants, known as stationary sources, that emit pollutants regulated by the NAAQS as well as stationary sources that emit hazardous air pollutants. Her comprehensive account of the many regulatory programs under the CAA shows both real successes in establishing durable yet adaptable policy and some significant – and obvious – failures. Chapter 4, by political scientist Barry Rabe, turns its attention to the regulation of mobile sources (passenger cars, trucks, off-road vehicles and so forth). Professor Rabe uses the unique federalism arrangement the CAA incorporates as his central focus. He shows that this arrangement – which gives California special authority to regulate emissions from mobile sources while preempting all other state authority to regulate separately – has been among the most durable, yet adaptable, provisions of the CAA. In Chapter 5, economist Joseph E. Aldy looks at the CAA’s regulation of fuels. The story of durability and flexibility is perhaps most mixed in these programs. The CAA has produced some great successes in the regulation of fuels – in eliminating lead from gasoline – and one of its greatest failures to date – in the attempt to produce renewable fuels. The failure in the case of the renewable fuels program may be because it is simply too adaptable, producing no clear signal to fuel producers about what will be expected of them year to year. And finally, in Chapter 6, political scientist Eric M. Patashnik steps away from examining specific programs and offers an account of a particular regulatory approach – the incorporation of flexible market-based tools – that cuts across multiple parts of the CAA. Two of his most interesting conclusions are that several market-based programs have proven to be less durable than more traditional regulatory programs and that the CAA has not always provided EPA with the authority necessary to design market-based programs effectively. Other market-based programs have, however, proven to be more successful in promoting our metrics, and this chapter provides important insights about how and why. We conclude, in Chapter 7, with broad lessons about our focus – durability, adaptability and flexibility – that we derive from the five substantive chapters.
