Monday, June 25, 2007

Supreme Court Press Pollution Confusion

Anyone who enjoys confusion, and who doesn't, has to love the incoherent press coverage of the Supreme Court decision that EPA has the authority to regulate CO2 as a pollutant. Widely hailed as a victory for global warming, it was in fact just a small step in that general direction. But then every step, even backward, gets hailed as a victory. Best to celebrate now when nothing important may ever happen.

To begin with, the SC did not determine that CO2 is a hazardous pollutant, just a contributing pollutant along the lines of NOx, a precursor to ozone. The Clean Air Act defines a pollutant as any substance that has the potential to cause human harm if emitted. CO2 clearly fits this description if the theory of human induced warming is assumed possibly true, something the SC was not about to rule against.

The case was actually very narrow. The definition of "pollutant" occurs three places in the Act and climate change is specifically mentioned, but only in one of the three. The question was which definition controls? The Court ruled that the broadest definition holds, which we agree with as a matter of law. Nothing shocking about it, except maybe the 1990 language in the Act mentioning climate change. We have been at this a very long time. The press on this simple decision was suitably incoherent.

Now what? This action began with a citizen petition to EPA to regulate CO2 from autos. EPA said it did not have the authority to do so under the Clean Air Act. The Court says it does. EPA can now deny the petition on the grounds it offered the Court already -- uncertainty. Uncertainty so great the damage cannot be ascertained, if indeed there is any. If it does so that decision will be taken to court, where EPA has a good chance of winning because they are the experts and the courts seldom overturn agency expert findings.

Of course everything may change if we get a new administration and EPA suddenly wants to regulate CO2. Then we might get to the interesting little issues described below. You begin to see why 10-15 years is the timeframe.

Suppose EPA decides to regulate CO2, then if so, how? That too will be blockaded and litigated in great depth, as the Act does not provide a mechanism that is appropriate. The difference between being a hazardous air pollutant (HAP) and being an indirect or "criteria" pollutant is very big when it comes to possible EPA regulation. Rule making is itself heavily regulated and litigated, so many of the skeptical arguments will be tested in detail. This will take 10-15 years and serious regulation is by no means inevitable.

For example, EPA has to do a cost benefit regulatory analysis to show that any proposed rule is beneficial. Unlike the UK's nonsensical Nick Stern, who says helping people 200 years from now is just as important as helping them today, EPA has to use a large discount rate, usually 7 to 10%. This makes distant future benefits worthless. Positive net benefits based on a 100 year timeframe will be impossible to demonstrate.

The rules for cost benefit analysis of federal regulations are made by OMB/OIRA--

Specific OIRA rules for regulatory analysis (also called regulatory impact analysis or RIA) start here --

Here is a nifty database of RIAs--

Also, while HAP emissions can be regulated directly, for criteria pollutants EPA has to set a national ambient concentration level. Only areas that exceed that level can be regulated, as well as being punished. What level can they choose? If they say 440 then everyone is in attainment. If 300 then everyone is out of attainment but due to global factors beyond their control, like Chinese coal plants and the last 50 years of human life, which is probably unConstitutional. This local concentration reg mechanism simply does not work for CO2. The courts should agree.

Basic point is that if Congress wants EPA to regulate CO2 they need a new law. If the system is rational this view is likely to prevail.

The Supreme Court decision is just the first move, no more than P-Q4 in a very colorful chess game. EPA tried to duck the entire issue but they can't, so now the real fun begins. Skepticism will finally get its day in court.

Enjoy the show.

The Washington Pest