Comparing the Clean Air Act and a Carbon Price

• Date: 01 June 2014

44 ELR 10472 ENVIRONMENTAL LAW REPORTER 6-2014

A R T I C L E S

Comparing the

Clean Air Act and

a Carbon Price

by Nathan Richardson and

Arthur G. Fraas

Nathan Richardson and Arthur G. Fraas are a resident scholar

and visiting scholar, respectively, at Resources for the Future.

Summary

Over the last half-decade, a variety of federal legis-

lative proposals for limiting greenhouse gas (GHG)

emissions have been put forward, most of which

would set a price on carbon. As of early 2013, the one

politically plausible policy appears to be a carbon tax,

passed as part of a larger scal reform package. Mean-

while, the U.S. Environmental Protection Agency has

begun regulating GHG emissions from a variety of

sources using its authority under the Clean Air Act.

It may be necessary to choose between these two poli-

cies, however. e Waxman-Markey cap-and-trade

bill that failed in 2009 would have preempted much

of this authority, and it appears likely that a carbon

tax law would do the same. But how can one make

this choice?

Over the last half-decade, a variety of federal legisla-

tive proposals for limiting greenhouse gas (GHG)

emissions have been put forward, with va rying

levels of enthusiasm in the U.S. Congress, the policy com-

munity, and among the public. ose proposals that would

set a price on carbon—a GHG cap-and-trade system or a

carbon tax—are most favored by economists, but others,

like clean energy sta ndards, have at one t ime or another

been the policy du jour. As of today, the most politically

plausible pricing policy appears to be a carbon tax, passed

as part of a larger scal reform package.

Over the same period, and especially under President

Barack Obama after 2008, an a lternative vehicle for cli-

mate policy has emerged—U.S. Environmental Protection

Agency (EPA) regulation authorized by the Clean Air Act

(CAA).1 Regulation of road vehicles has been strengthened

to limit GHG emissions. Other regulation has been for-

mally proposed for new power plants and is under con-

sideration for existing power plants and, perhaps, other

emitting sectors. e possible impact of this regulation

on U.S. GHG emissions is signicant. Research suggests

that, along with reductions already taking place because

of market factors—especially the post-2008 recession and

recent low prices of natura l gas—C AA regulation may be

sucient to reach t he president’s goal of 17% emissions

reductions over 20 05 levels by 2020, as stated in Copen-

hagen in 2010.2

is regulatory pathway is unpopular in Congress, with

Republicans and even some Democrats actively seeking

to block specic regulations or to adopt legislation strip-

ping EPA of climate-related authority. Many greens, on

the other hand, argue that new federal climate policy (like

a carbon tax) is compatible with parallel CA A regulation

and that existing authority should be preserved.

Congress may or may not pass new climate legislation,

and it may or may not pass legislation limiting EPA author-

ity under the CAA. is results in four possibilities for

U.S. climate policy.

EPA authorit y

mostly/ wholly

preempted

EPA authorit y

mostly lef t intact

No new climate

legislation

1. No federal cli mate

policy

2. EPA regulates unde r

the CAA ( status

quo)

New climate

legislation

3. Carbon price

supplants E PA

regulation

4. Parallel E PA regula-

tion and carbon

price

1. 42 U.S.C. §§7401-7671q, ELR S. CAA §§101-618.

2. Dallas Burtraw & Matt Woerman, U.S. Status on Climate Change Mitiga-

tion, RFF Discussion Paper 12-48 (Oct. 2012), available at http://www.r.

org/Publications/Pages/PublicationDetails.aspx?PublicationID=22073.

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