Energy-environment Policy Alignments

• Publication year: 2021

ENERGY-ENVIRONMENT POLICY ALIGNMENTS

Todd S. Aagaard(fn*)

Abstract: Energy law focuses on making energy widely available at reasonable cost, and environmental law focuses on preventing pollution. As a result of these differences in their respective orientations, the two fields often work incoherently and even in conflict. Historically, federal energy law and environmental law have attempted to manage their interrelationships by imposing negative constraints on each other: Energy policies of the Federal Energy Regulatory Commission (FERC) must comply with requirements set forth in environmental statutes, and the Environmental Protection Agency's (EPA's) statutes contain energy-related requirements and exemptions. More recently, however, FERC and EPA have begun developing policies that create beneficial alignments between their respective fields. This Article argues that these policy alignments, which emphasize opportunities for positive synergy rather than negative constraints, offer a promising new direction for the energy-environment relationship. More broadly, policy alignments provide a potentially useful model for managing relationships among other overlapping fields as well.

INTRODUCTION .............................................................................. 1518

I. ENERGY LAW AND ENVIRONMENTAL LAW'S COMPETING PARADIGMS ...................................................... 1523

A. Energy Law ........................................................................ 1523

B. Environmental Law ............................................................ 1527

C. Creating the Energy-Environment Divide .......................... 1530

1. Economic Regulation and Social Regulation ........... 1530

2. Energy-Environment Interrelationships ................... 1531

3. Energy-Environment Conflicts ................................. 1532

II. NEGATIVE CONSTRAINTS EXACERBATE THE ENERGY-ENVIRONMENT DIVIDE ........................................ 1533

A. Environmental Requirements in Energy Law .................... 1534

B. Energy Requirements in Environmental Law .................... 1538

C. Exacerbating the Energy-Environment Divide .................. 1543

III. POLICY ALIGNMENTS BRIDGE THE ENERGY-ENVIRONMENT DIVIDE .......................................................... 1545

A. Energy Policies that Align with Environmental Objectives...........................................................................1547

1. Transmission Planning and Cost Allocation............1549

2. Demand Response....................................................1554

3. Energy Storage......................................................... 1559

4. Standard Interconnection Agreements.....................1562

B. Environmental Policies that Align with Energy Objectives...........................................................................1563

1. Acid Rain Program's Conservation and Renewable Energy Credits.......................................................... 1563

2. Clean Power Plan.....................................................1566

C. Bridging the Energy-Environment Divide......................... 1569

1. Key Characteristics...................................................1569

2. Advantages...............................................................1572

3. Limitations................................................................ 1574

4. Implications.............................................................. 1577

CONCLUSION..................................................................................1580

INTRODUCTION

Energy and the environment, which have long overlapped, are now converging to an unprecedented extent. Consider the following examples: * Energy production, energy markets, and energy use are driving many important and difficult environmental issues of our time. Energy-related activities account for 84.3% of anthropogenic greenhouse gas emissions in the United States.(fn1) Burning coal for heat and power generation produces millions of tons per year of fly ash, bottom ash, and boiler slag, the disposal of which can contaminate land and water.(fn2) * Hydraulic fracturing and horizontal drilling have rapidly transformed the United States' energy economy. Domestic natural gas production from shale gas wells increased from 2.87 trillion cubic feet in 2008 to 11.90 trillion cubic feet in 2013.(fn3) In 2010, the United States was the world's largest importer of natural gas;(fn4) some analysts project that the United States will become a net exporter of natural gas as soon as 2016.(fn5) This dramatic escalation of production has implications for pollution issues across all environmental media-air, water, and land- and a range of natural resource issues as well.(fn6) * Legal and technical developments in the nation's electricity grid have important ramifications for the development of alternative energy sources and technologies that may reduce the use of fossil fuels and their attendant environmental issues. Traditionally, vertically integrated utilities that generate power at large, centralized, fossil fuel-fired power plants have dominated the electric power industry.(fn7) More recently, technical, legal, and economic innovations have enabled and supported the development of more decentralized power services.(fn8) Much of this new wave of power services utilizes renewable energy and demand response resources(fn9) that can substitute for fossil fuel combustion-based generation, with economic and environmental ramifications.(fn10) Contrary to the convergence of energy issues and environmental concerns, however, energy law and environmental law have stayed separate.(fn11) Existing efforts to manage the energy-environment relationship, focused on merely preventing outright conflicts, have largely failed to reconcile the two fields.(fn12) This Article argues in favor of an alternative model for bridging the energy-environment divide by creating policy alignments-policies that simultaneously support the objectives of energy law and environmental law. Policy alignments leverage opportunities for positive synergy and offer a promising new direction for the energy-environment relationship.

Energy law and environmental law remain divided because of differences in their respective orientations. Energy law seeks to keep energy costs low. Like other energy agencies, the lead federal energy regulator, the Federal Energy Regulatory Commission (FERC), focuses on economic regulation to make energy widely available to end users at reasonable cost.(fn13) For much of the twentieth century, energy policy promoted and benefited from economies of scale in the energy sector, in which increasing energy production leads to decreasing energy prices.(fn14) Low energy costs therefore depended on increasing energy use, and increasing energy use entailed increasing environmental impacts.(fn15) Moreover, policies aimed at making energy available and affordable also incentivized the use of coal, a fuel with historically low cost and ready availability but high pollutant emissions.(fn16) Thus, energy law's goal of low energy costs has had the effect of stimulating energy use and production and the environmental harms they cause.

Environmental law has attempted to reduce environmental harms from energy-related activities such as power generation. The lead federal environmental regulator, the Environmental Protection Agency (EPA), focuses on preventing pollution and damage to natural resources.(fn17) Reducing environmentally harmful emissions and discharges, however, generally costs money. The costs of installing pollution control equipment at a single coal-fired power plant, for example, may exceed $200 million.(fn18) Thus, environmental regulations often increase the costs of energy production and use.

This energy-environment divide does not entail a complete separation between the two fields. FERC's energy statutes are subject to environmental requirements, and EPA's environmental statutes contain energy requirements. But this limited cross-incorporation does little to transcend the divide. Instead, it adopts a negative model that attempts to manage energy-environment relationships by using requirements from one field to constrain the other: Environmental requirements constrain FERC,(fn19) and energy requirements constrain EPA.(fn20) Negative constraints thus, by their very design, place energy and environmental goals in opposition, exacerbating the energy-environment divide. Negative constraints also have limited efficacy because agencies have an incentive to avoid or minimize requirements that attempt to divert them from their core missions. Even when negative constraints are effective, they impede rather than empower agencies.

Against this backdrop of an energy-environment divide, there is a promising alternative model for managing the energy-environment overlap. Within their respective jurisdictions, both FERC and EPA have developed some policies that take advantage of circumstances in which energy goals and environmental goals align. These policy alignments involve policies in one field that align with, without directly adopting, the objectives of another field. Policy alignments thus allow each agency to pursue its respective mission and to utilize its specific expertise, but in ways that support the other's policy objectives...