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Free Market Groups Call for Repeal of Clean Power Plan

Public policy analysts from 20 free-market organizations, including the Competitive Enterprise Institute, today filed a joint comment letter in support of Environmental Protection Agency Administrator Scott Pruitt’s proposal to repeal the Obama administration’s so-called Clean Power Plan (CPP).

“We strongly support repeal of the CPP based on EPA’s reading of the Clean Air Act (CAA),” the groups declare in their joint filing. “This action is critical to end the previous administration’s economically destructive war on fossil fuels and deter future attempts to inflate EPA into a national climate policy legislator and energy czar.”

The groups’ summarize their extensive and detailed comments as follows.

The Clean Power Plan was President Obama’s marquee domestic climate policy and regulatory centerpiece of his Paris climate treaty emission-reduction pledge. Unable to persuade Congress to enact cap-and-trade legislation, Obama vowed to find other ways to “skin the cat,” and directed EPA to regulate carbon dioxide emissions from the U.S. power sector. The CPP was the result. It is unlawful for all the reasons outlined in the repeal proposal plus others described herein.

Under section 111 of the Clean Air Act (CAA), emission performance standards are to reflect the “best system of emission reduction” (BSER) that has been “adequately demonstrated” as feasible and affordable. Such “systems” are designed for and apply to “sources,” so the legal meaning of “system” depends on that of “source.” A “source” is defined as “any building, structure, facility, or installation which emits or may emit air pollutants.” Consequently, a bona fide BSER must be based on measures that can be applied at and by the source.

The Obama administration refused to accept that limitation because there is no “adequately demonstrated” best system for reducing carbon dioxide emissions from existing power plants. The closest facsimile would be equipment upgrades that improve operational efficiency. However, increasing the efficiency of fossil-fuel power plants would not advance Obama’s goal to “finally make renewable energy the profitable kind of energy in America.”

So, EPA came up with a plan to impose unattainable emission performance standards on existing fossil fuel power plants. To comply, owners and operators must purchase power from, invest in, or cede market share to lower- and zero-emission facilities elsewhere on the grid. Such “generation shifting” is the heart of BSER under the Clean Power Plan.

To make it look legal, the CPP reimagines “source” to include power plant owners and operators in their capacity as marketplace actors. More fundamentally, the CPP imagines the entire U.S. electricity system to be a single source—a vast “machine” in which individual power plants are mere cogs.

As the repeal proposal argues, generation shifting is an unlawful BSER because owners and operators are not “sources,” and, as we explain, neither are economic sectors. We debunk the CPP’s non sequitur argument that generation shifting is a lawful BSER because the Obama EPA considers it an efficient climate policy. We show that Congress’s authorization of generation shifting in CAA Title IV actually cuts against the CPP, because section 111 contains none of Title IV’s generation-shifting terminology. We explain how the CPP’s novel BSER produces four illogical outcomes, such as imposing tougher emission standards on existing power plants than the corresponding new source rule imposes on new sources.

We conclude, however, that the CPP would still be unlawful even if it were based on measures that can be applied at and by individual sources. As the agency’s 1975 implementing rule explains, Congress intended for CAA section 111(d) to address air pollutants with “highly localized” effects from sources that are not “numerous or diverse.” Carbon dioxide emissions have the opposite characteristics. The carbon dioxide greenhouse effect is global, not local, and carbon dioxide is emitted by both numerous and diverse sources. Carbon dioxide and CAA section 111(d) are a complete mismatch.

In addition, BSER in all previous CAA section 111 rules was based on specific emission-control technologies. There is no adequately demonstrated best system for reducing carbon dioxide emissions from existing power plants. Absent a bona fide BSER, section 111(d) may not be used to regulate carbon dioxide emissions from those facilities.

The CPP is also unlawful because it lacks a valid prerequisite CAA section 111(b) new source rule. The Obama EPA determined that “partial” carbon capture and storage is the adequately demonstrated BSER for new coal power plants. However, carbon capture is not adequately demonstrated because it is too costly, too subsidy-dependent, and not even plausibly economical unless paired with enhanced oil recovery operations, which are geologically-limited to specific regions.

Most importantly, CAA section 111(d) excludes from its regulatory purview “any air pollutant . . . emitted from a source category regulated under CAA section 112.” Coal power plants have been so regulated since 2012, and natural gas combustion turbines since 2004. The CPP is unlawful under the very provision that purportedly authorizes it. Any CPP replacement rule would be unlawful for the same reason.

Turning to the repeal rule’s broader policy concerns, the CPP’s regulation of intrastate electricity markets not only invades a traditional zone of state responsibility, it also undermines the interstate policy competition that safeguards economic and political liberty. By cartelizing state energy policies along the lines of the California Global Warming Solutions Act and the Regional Greenhouse Gas Initiative, the CPP restricts citizens and firms’ ability to “vote with their feet” for pro-growth energy policies. Repealing the CPP will help restore choice and competition in energy policy, which in turn will help preserve choice and competition in American politics.

The CPP would implement a policy shift of immense economic and political magnitude without clear congressional authorization. When Congress last amended CAA section 111(d) in 1990, it also considered and rejected proposals to authorize regulatory climate policies. The 111th Congress declined to pass cap-and-trade legislation even though everyone agreed it would be more efficient, more predictable, and more sensitive to regional interests than an EPA-run regulatory program. In 2015, the House and Senate passed resolutions of disapproval to overturn the CPP. The CPP was a climate coup in which an administrative agency usurped legislative power.

Turning to the repeal proposal’s draft Regulatory Impact Analysis (RIA), we applaud EPA’s decision to use appropriate discount rates in regulatory analysis, and to compare domestic climate benefits to compliance costs when calculating CPP benefit-cost ratios. However, the draft RIA’s social cost of carbon dioxide analysis still uses an outdated 2007 study that likely overestimates climate sensitivity (the amount of warming from a doubling of atmospheric carbon dioxide concentration), and still relies on two structurally-biased models that lack significant carbon dioxide-fertilization benefits.

The final RIA should make the case that physical and economic uncertainties render quantification of carbon dioxide reduction benefits illusory and misleading. If courts refuse to defer to the agency’s expertise, EPA should draw the line at providing a range of cost of carbon dioxide values based on plausible alternative assumptions. Under some reasonable assumptions, the cost is negative, which implies carbon dioxide emissions produce net benefits.  

We also applaud EPA’s decision to estimate the collateral benefits of CPP-induced reductions in fine particulate matter (PM2.5) using two “cutpoints” below which health risks are too uncertain to quantify. The Obama EPA’s linear-no-threshold (LNT) assumption that PM2.5 kills at any concentration above zero is non-validated, contrary to considerable evidence, and a license for regulatory excess.

When the draft RIA sets the cutpoint at the current national ambient air quality standard of 12 micrograms per cubic meter (µg/m3), CPP-related PM2.5 “co-benefits” decline from between $22.6 billion and $44.9 billion in 2030 to between $4.0 billion and $7.3 billion. The compliance costs avoided by repealing the CPP then exceed foregone health benefits by $7.1 billion to $10.4 billion.

In light of more than 20 studies that find no significant association between PM2.5 exposure and mortality, including a recent analysis of 2 million deaths in eight California air basins over a 13-year period, EPA should not assume PM2.5 currently causes any premature mortality in the United States. If courts refuse to defer to the agency’s expertise, EPA should estimate PM2.5 co-benefits under an additional cutpoint: 15 µg/m3, the federal air quality standard promulgated in 1997 and renewed in 2006.

In addition to yours truly, the following analysts co-signed the comment letter: Jameson Taylor, Ph.D. (Mississippi Center for Public Policy), John Droz, Jr. (Alliance for Wise Energy Decisions), Paul J. Gessing (Rio Grande Foundation), Paul Driessen (CFACT), E. Calvin Beisner, Ph.D. (Cornwall Alliance for the Stewardship of Creation), James L. Martin and Saulius Anuzis (60 Plus Association), Norman Singleton (Campaign for Liberty), Amy Cooke (Independence Institute), Kory Swanson (John Locke Foundation), David T. Stevenson (Caesar Rodney Institute), Benjamin Zycher (American Enterprise Institute), Wayne Brough, Ph.D. (FreedomWorks), Thomas J. Pyle (Institute for Energy Research), Paul Blair (Americans for Tax Reform), Phil Kerpen (American Commitment), Brent Gardener (Americans for Prosperity), Craig Richardson (E&E Legal), and Brett Healy (John K. MacIver Institute for Public Policy).

To read the complete comment letter, click here.