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We don't need no stinking safety valve!

If elected President, Barack Obama will give EPA the green light to regulate carbon dioxide under the Clean Air Act, Bloomberg.com reports. Bloomberg's source is Obama's energy adviser, Jason Grumet, who also serves as executive director of the self-styled National Commission on Energy Policy (NCEP).

This is all very odd. NCEP is the leading proponent of a price-cap “safety valve” to limit the energy and economic impacts of a carbon trading program (see p. 21 of this report). NCEP touts its safety valve proposal as the moderate middle between the regulate-at-any-cost Left and the regulate-under-no-circumstances Right. Supposedly, the safety valve would take the economic risk out of regulating carbon, because the government would commit in advance to sell as many permits as might be needed to keep carbon prices within a preset cost ceiling. Under the original NCEP plan, for example, the government would guarantee that carbon permit prices do not exceed $7.00 per ton in the first year, and do not increase by more than 5 percent annually.

Now, EPA's authority to establish any kind of cap-and-trade program under the Clean Air Act is doubtful. In North Carolina v EPA (July 11, 2008), the D.C. Circuit Court of Appeals vacated EPA's Clean Air Interstate Rule—a plan to control traditional air pollutants via an interstate cap-and-trade program. There is certainly no provision in the Clean Air Act authorizing EPA to establish an NCEP-style trading program with a safety valve.

More fundamentally, if Mr. Grumet truly believes that climate legislation lacking a safety valve is a non-starter because it would subject U.S. businesses to unacceptable risk, then he should view the Clean Air Act as a flawed, unsuited, and potentially destructive instrument for regulating carbon dioxide. As EPA's advanced notice of proposed rulemaking and other analyses demonstrate (see here, here, and here), regulating carbon dioxide under any Clean Air Act program would trigger a regulatory cascade with enormous potential to inflate energy costs, create massive uncertainty for business, and stifle economic development.

It's not hard to understand why Sen. Barbara Boxer (D-CA), Rep. Henry Waxman (D-CA), and Rep. Ed Markey (D-MA) castigate President Bush and Bush's EPA for not taking the first steps to regulate carbon dioxide via the Clean Air Act. Boxer, Waxman, and Markey would like nothing better than for Bush to adopt their climate policy agenda on steroids but without any of them having to vote for it or take responsibility for the economic fallout.

But with the Dow plummeting, banks failing, businesses folding, and hundreds of thousands of people losing their jobs, why should Mr. Obama want to take ownership of the administrative morass and economy-chilling burdens that Clean Air Act regulation of carbon dioxide would almost certainly produce?  That Jason Grumet of all people apparently thinks this is a fine idea, is mind boggling. The Obama campaign might as well print bumper stickers proclaiming, “We don't need no stinking safety valve!”