As the deadline approaches for the Environmental Protection Agency’s (EPA) new greenhouse gas regulations on existing stationary sources under the Clean Air Act (CAA), one of the biggest objections is the added cost. How can compliance flexibility address these issues, and is there even room for flexible standards under the CAA? I sat down with RFF Resident Scholar Nathan Richardson to address these issues. He along with RFF Senior Fellow Dallas Burtraw and colleagues at Columbia Law School and New York University School of Law wrote a letter to EPA Administrator Lisa Jackson highlighting the possibilities of flexible standards under the CAA. The summary of the letter can be found in their discussion paper Prevailing Academic View on Compliance Flexibility under § 111 of the CAA.
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Highlights from the podcast are below:
“The main thing we said [in the letter to Lisa Jackson] is that the legal community in general – certainly not everybody and certainly not a consensus - but the majority of legal academics that have written and talked about these topics think that the section of the Clean Air Act that the EPA is using for this program allows for a lot of flexibility. EPA therefore has these tools. The limits of them aren’t clear, litigation is likely anyway – those are important caveats. But EPA doesn’t have to do a one-size-fits-all performance standard here. They can really grant a lot of flexibility, and states might be able to go a little further.”
“EPA’s not going to do cap and trade… but there are a lot of options short of that that could be really effective. One that we looked at at RFF is a tradable performance standard. Essentially it requires coal plants to get more efficient on average. The guys that get really efficient can trade to the guys that find it harder to do so, rather than each plant having to meet a certain specific standard.”
“Dallas [Burtraw]’s research suggests costs would be something like 70 percent lower. This is only one form of flexibility – this tradable performance standard we’ve looked at, and it includes some assumptions that I think need a harder look. Nevertheless, I think the evidence is really strong. And it’s not just total costs that his team has looked at. It looks like the effects on electricity prices will be smaller under a flexible performance standard. The amount of shutdowns of coal plants will be smaller… In terms of economic costs having fewer shutdowns in favor of efficiency improvements is usually going to be cheaper, and the flexible performance standard lets you get that. The coal fleet gets a lot more efficient rather than getting shut down.”
“It’s going to have to be a cooperative effort between the EPA and the states. If they can’t come to an agreement, litigation is likely to result anyway, but if the states and the EPA can’t agree on how to implement this, it’s not going to work.”