Grandfathering Coal: Power Plant Regulation Under the Clean Air Act

• Date: 01 July 2016

7-2016 NEWS & ANALYSIS 46 ELR 10541

D I A L O G U E

Grandfathering Coal: Power Plant

Regulation Under the Clean Air Act

Summary

In their book Struggling for Air: Power Plants and the

“War on Coal,” Richard Revesz and Jack Lienke detail

the history of the Clean Air Act and the political com-

promises that led to exempting existing power plants

from signicant portions of the Act’s regulatory author-

ity. ey explain that the Act’s ambitious health-based

goals fell short due to this “grandfathering,” which

disincentivizes utilities from updating existing power

plants or constructing new ones; and they examine

attempts by the executive branch to address its impacts,

including the Obama Administration’s Clean Power

Plan. Coal proponents claim these eorts aim to sig-

nicantly reduce coal’s share of the electricity mar-

ket, leading some to talk about a “War on Coal.” But

does the reality live up to the critics’ fears? On January

27, 2016, the Environmental Law Institute convened

Revesz, Lienke, and other experts in the eld to discuss

the degree to which the Clean Power Plan reduces pol-

lution, and the interaction between grandfathering and

pollution reduction. Below we present a transcript of

the discussion, which has been edited for style, clarity,

and space considerations.

Richard Revesz (moderator) is Lawrence King Professor

of Law and Dean Emeritus at New York University Law

School and co-author of Struggling for Air.

William M. Bu mpers is a Partner at Baker Botts LLP.

Jack Lienke is a Senior Attorney at New York University

Law School’s Institute for Policy Integrity and co-author of

Struggling for Air.

David Doniger is Director of the Climate and Clean Air

Program at the Natural Resources Defense Council.

William Rosenberg was Assistant Administrator for

EPA’s Oce of Air and Radiation in t he George H.W.

Bush Administration.

Richard Re vesz: e focus of our Dialogue today is a

book I coauthored with Jack Lienke, Struggling for Air.1

1. R R  J L, S  A: P P

  “W  C” (2016).

e book deals with a problem that I had been interested

in a s an academic for a long time, which is the problem

of grandfathering. Grandfathering is a ty pical move in

regulatory policy: a regulator sets stringent standa rds

for new sources but exempts existing source s from those

standards. You can underst and why this would happen: It

helps to buy the support of exist ing sources, or at least to

blunt the opposition.

However, grandfathering leads to some perverse incen-

tives, such as that existing sources have a n incentive to

stay in operation a lot longer than would otherwise have

been the case. Generally, what makes existing sources close

down to be replaced by new sources is t hat the existing

sources are less ecient, so, after some period of time, it’s

worth the investment to have a new source replace the

existing source. But if you impose a very high cost on new

sources and no comparable cost on existing sources, then

you’ve made it economically desirable to operate the exist-

ing sources a lot longer. is doesn’t necessari ly mean that

new sources a nd existing source s should be subjected to

the same standards. It is ty pically much more expensive to

retrot existing sources than to build new sources with the

standards in mind. e question is how big the disparity in

the regulations bet ween existing and new sources is going

to be, and will there be an end time for that disparity.

Our book is an eort to analyze 45 years of develop-

ment under the Clean Air Act2 through that lens. In 1970,

when the U.S. Congress enacted the Clea n Air Act, it was

a hugely important undertaking. It imposed standa rds

on new sources—the new source performance standards

(NSPS)—and the U.S. Environmental Protection Agency

(EPA) quickly went about its job of coming up with stan-

dards for categories of new sources. But there were no com-

parable federal requirements on existing sources. e states

under their state implementation plans (SIPs) had to do

whatever it took to meet the national ambient air qual-

ity standards (NA AQS). But there were no existing source

standards that were comparable to the NSPS.

Part of the rea son that Congress imposed standards on

new sources but not on existing sources was that ma ny

existing power plants were approaching the end of what

was then considered to be roughly a 30-year useful life, so

why expend a lot of time and energy and incur political

opposition when the plants of concern were close to the

2. 42 U.S.C. §§7401-7671q, ELR S. CAA §§101-618.

Copyright © 2016 Environmental Law Institute®, Washington, DC. Reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.