Last week (June 7, 2007), a panel of the House Energy and Commerce Committee held a hearing on Chairman John Dingell (D-MI) and Subcommittee Chair Rick Boucher's (D-VA) discussion-draft legislation concerning alternative fuels, infrastructure, and vehicles. The bill is laden with mandates and new spending authority. Several prominent Democrats along with California Gov. Arnold Schwarzenegger have declared their opposition to the bill.
Among other provisions, the bill would:
- Compel refiners, blenders, and importers to sell 35 billion gallons per year of “alternative” motor fuels by 2025;
- Establish a first-ever low-carbon standard for motor fuels;
- Increase fuel economy standards from 27.5 to 36 mpg by 2021 for passenger cars (a 31% increase) and from 20.7 to 30 mpg by 2024 for SUVs and other light trucks (a 35% increase);
- Establish an escalating production quota for vehicles capable of running on both gasoline and E-85 (a motor fuel blended with 15% gasoline and 85% ethanol), such that flexible-fuel vehicles make up 45% of all vehicle sales in 2012 and 85% of all sales in 2020;
- Require motor fuel retailers to install E-85 dispensaries in areas where flex-fuel vehicle market penetration reaches 15%; and
- Authorize $1.4 billion in grants for installation of alternative fuel pumps in service stations during FYs 2008-2014, plus “such sums as may be necessary thereafter.”
Now, you might think the Kyoto crowd would be pleased with this “first step” in saving us from the alleged twin perils of oil imports (without which gasoline prices would easily be $10 a gallon) and global warming (which during the past century coincided with an estimated 1,800% increase in global GPD). After all, passage of the bill would not preclude Congress from enacting a carbon cap-and-trade scheme or a national set-aside program for wind and solar power.
Dems assail legislation
But the Kyotoites are up in arms because Title VII of the discussion draft would ensure that the authority to administer new-car fuel economy standards would remain where Congress put it more than 30 years ago—in the National Highway Traffic Safety Administration (NHTSA). They want to shift the power to regulate fuel economy to the Environmental Protection Agency (EPA), the State of California, and other states opting to follow California's lead.
The California greenhouse gang—Speaker Nancy Pelosi, Rep. Henry Waxman, Sen. Barbara Boxer, Gov. Arnold Schwarzenegger, and Atty. Gen. Jerry Brown—complain that the Dingell-Boucher legislation would overturn both California's “landmark” program to regulate greenhouse gas (GHG) emissions from new motor vehicles and Mass v EPA, the recent case in which the Supreme Court essentially told EPA to begin regulating GHG emissions from new cars and trucks. Pretty strong accusations—are they valid?
In 2004, the California Air Resources Board (CARB) issued regulations requiring GHG emissions from the average car sold in the state to be 30% below 1990 levels by 2016. A coalition of automakers filed suit against CARB, arguing that the law establishes de facto fuel economy standards, and therefore violates the 1975 Energy Policy and Conservation Act (EPCA), which prohibits states from adopting laws or regulations “related to” fuel economy.
Carbon dioxide is the main GHG emitted by internal combustion engines, and the automakers argued—correctly—that no commercially available technology exists that can capture or destroy CO2 emissions from internal combustion engines. Consequently, to meet standards requiring new vehicles to emit fewer grams of CO2 per mile, automakers would have to redesign cars and trucks to burn fewer gallons per mile. CARB's new emission standards are just fuel economy standards by another name, and as such, violate EPCA.
In Mass v EPA, a dozen state attorneys general, three cities, and numerous environmental groups sued EPA for rejecting a petition to regulate motor vehicle GHG emissions. In a superb interveners' brief filed in the case, the automakers, again explaining that vehicular CO2 emission standards are de facto fuel economy standards, pointed out that Congress authorized NHTSA, not EPA, to administer fuel economy standards. EPA-designed CO2 emission standards would either conflict with or wastefully duplicate NTSHA-administered fuel economy standards—results Congress presumably did not intend.
The 5-4 majority on the Court failed to engage this argument, instead simply asserting that there is “no reason to think the two agencies cannot both administer their obligations and yet avoid inconsistency.”
Judicial activism in overdrive
The majority also uncritically accepted the linchpin of plaintiffs' argument—the claim that CO2 is an “air pollutant” within the meaning of the Clean Air Act. Grant that premise, and EPA's authority to regulate CO2 from vehicles seems to follow, because EPA obviously has authority to regulate air pollutants.
The provision defining “air pollutant” in the Clean Air Act—Section 302(g)—is only two sentences long. Here it is, in full:
The term "air pollutant" means any air pollution agent or combination of such agents, including any physical, chemical, biological, radioactive (including source material, special nuclear material, and by-product material) substance or matter which is emitted into or otherwise enters the ambient air. Such term includes any precursors to the formation of any air pollutant, to the extent that the Administrator has identified such precursor or precursors for the particular purpose for which the term "air pollutant" is used.
To accept plaintiffs' claim that CO2 is an “air pollutant,” the majority had to ignore part of the first sentence and the entire second sentence.
Plaintiffs argued that the term “air pollutant” includes any “substance or matter which is emitted into or otherwise enters the ambient air,” and since CO2 is emitted, EPA may regulate it. Notice, however, that the first sentence does not make “air pollutant” co-extensive with anything and everything emitted into or entering the air. Rather, it says that any “air pollution agent” emitted into or entering the air is an air pollutant. The text does not define “air pollution agent,” but that's because it does not have to. An air pollution agent is obviously something that causes air pollution. It is something that dirties or fouls the air—something that degrades air quality. Carbon dioxide does not fit that description. A clear, odorless gas, CO2 is non-toxic to humans and other animals at 20 times ambient levels, and the ongoing rise in the air's CO2 content helps most crops, trees, and other plants grow bigger, produce more fruit, and utilize water more efficiently.
The majority erred in reading the term “air pollution agent” as a synonym for “air pollutant” rather than as a criterion for distinguishing air pollutants from non-pollutants. The effect is to make the first sentence of Section 302(g) hopelessly circular (an “air pollutant” is an “air pollutant”), with the bizarre result that oxygen, water vapor, and even—as Justice Scalia noted—Frisbees become “air pollutants.”
The second sentence of 302(g) says that precursors of substances previously designated by EPA as air pollutants are also air pollutants. There would have been no reason for Congress to include this sentence if, as the majority opined, anything emitted into or entering the air is ipso facto an “air pollutant.”
Several other considerations also compel the conclusion that the Clean Air Act does not authorize EPA to administer regulatory climate policies. Most obviously, there is no climate protection title, section, or sub-section in the Clean Air Act. In fact, the terms “greenhouse gas” and “greenhouse effect” do not even appear in the Act. The terms “carbon dioxide” and “global warming” do appear, but only once, in the context of non-regulatory provisions—Sections 103(g) and 602(e). Significantly, those provisions conclude by admonishing EPA not to infer authority for “pollution control requirements” or “additional regulation.” Such caveats would be pointless if, as the majority assumed, the Act's most general provision—the definition of “air pollutant”—already gave EPA regulatory authority over greenhouse gases.
Ignoring legislative and regulatory history
The immediate policy question raised in Mass v EPA is whether EPA must regulate vehicular GHG emissions under Section 202 of the Clean Air Act. Plaintiffs argued in the affirmative, but legislative and regulatory history suggests otherwise. A central purpose of Section 202 since it was enacted in 1970 and amended in 1977 has been to ensure that automobile engines become so clean burning that, ultimately, nothing comes out of the tailpipe except two greenhouse gases: water vapor and CO2 [see 40 C.F.R. § 85.2122(a)(15)(ii)(A)]. Catalytic converters and oxygenate fuel additives—required by Congress and EPA regulation for decades—increase GHG emissions from automobiles. Throughout Section 202's 37-year history, federal law and regulation have regarded CO2 and water vapor as harmless byproducts.
In its brief in Mass v EPA, EPA noted that, during the past quarter century, Congress has either voted against or declined to adopt every regulatory climate proposal it has considered. For example, and most pertinently, during debate on the 1990 Clean Air Act Amendments, Congress decided not to adopt a Senate committee-approved provision requiring EPA to regulate CO2 emissions from motor vehicles.
The majority deemed such legislative history irrelevant, arguing that Congress's failure to pass subsequent laws or provisions cannot curtail EPA's authority under Section 202. But this misses the point. EPA was not suggesting that “post-enactment legislative history” implicitly repeals portions of the Clean Air Act. Rather, EPA was trying to clarify what Congress might or might not have intended when it enacted and amended Section 202. Popular alarm about global warming and congressional support for regulatory climate policy is vastly stronger now than it was in 1970 or 1977. Yet even in recent years, proponents of regulatory climate policy have failed to secure passage of their proposals. It is silly to pretend that in 1970 or 1977, Congress granted EPA authority to regulate greenhouse gases but just forgot to tell anybody.
The larger issue put in play by Mass v EPA is whether EPA must set national ambient air quality standards (NAAQS) for CO2 and other greenhouse gases. This is not obvious at first glance, but is well known to policy insiders.
EPA's first step in regulating an air pollutant under Section 202 is to make a “judgment of endangerment.” Any EPA regulation of CO2-emission rates from motor vehicles would have to include, and be based upon, an official judgment that CO2 emissions “endanger public health or welfare.” In setting such standards, Section 202 directs EPA to take account of technological feasibility and cost. This is one reason plaintiffs argued that EPA regulation of CO2 emissions from cars would not adversely affect the U.S. auto industry.
What plaintiffs conveniently neglected to mention is that an endangerment finding with respect to CO2 emissions under Section 202 would trigger regulatory action under other Clean Air Act provisions. The most important such provision is Section 108, the cornerstone of the NAAQS program. Whereas Section 202 standards are emission rate (grams per mile) standards, Section 108 standards are pollution concentration (parts per million) standards. That is, a NAAQS specifies how many parts per million (or billion) of a substance is allowable in the ambient air. The NAAQS program requires States to adopt policies that will reduce concentrations of the pollutant of concern to the allowable level. And here's the kicker: In setting NAAQS, EPA is prohibited from taking cost and technological feasibility into account.
The majority in Mass v EPA has created a regulatory Pandora's Box. Consider that the Kyoto Protocol, which by some estimates could cost the U.S. economy hundreds of billions annually, would only slow the increase in CO2 levels. One prominent alarmist estimated that it would take “thirty Kyotos” to stabilize CO2 levels. Plaintiffs in Mass v EPA argued that current CO2 levels endanger public health and welfare. That's also what Al Gore and every other alarmist continually tells us.
So if EPA were to undertake a NAAQS rulemaking for CO2, the agency would face enormous pressures to set the standard below current atmospheric levels. However, there is no known way to lower atmospheric CO2 concentrations short of major global de-industrialization.
At the very least, establishing NAAQS for CO2 would give the Kyoto crowd carte blanche to demand ever-more onerous government meddling in energy markets and political constraints on economic growth. Would even de-industrializing America be enough to save the planet? “Probably not,” our greener friends would say, “but every little bit helps.”
That the winning plaintiffs in Mass v EPA view their lawsuit as a step towards economy-wide CO2 regulation under the NAAQS program is no mere matter of logical inference. In 2003, three of the State AG plaintiffs, including lead attorney Tom Reilly of Massachusetts, filed a notice of intent to sue EPA unless it initiated a NAAQ rulemaking for CO2.
Title VII of the Dingell-Boucher draft legislation aims to keep Pandora's Box shut. Dingell states the common sense of the matter when he says that GHG emission standards for cars are effectual fuel economy regulations, that only one agency should set fuel economy standards, and that it should be the one with the longest experience and most expertise in the field: NHTSA, not EPA or CARB.
Dingell denies that his legislation would overturn Mass v EPA, noting that it does not contest the majority's opinion that EPA has authority under the Clean Air Act to regulate CO2. What the legislation would do, however, is preempt an EPA rulemaking under Section 202. That would forestall—perhaps indefinitely—an EPA judgment of endangerment—the trigger for a NAAQS rulemaking with limitless potential to shut down economic growth.
Too bad we can't have Title VII without the 35 billion gallon bio-fuel mandate, low-carbon fuel standard, new fuel economy standards, and flex-fuel mandates. Political reality is seldom pretty, and from this free-marketer's viewpoint, it gets uglier by the day.