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The Clean Power Plan’s legal future

President Obama touted the final version of the Clean Power Plan as “the single most important step America has ever taken in the fight against global climate change.” For that claim to pan out, of course, the rule finalized on Monday must endure the barrage of lawsuits sure to be brought against it in the coming months. EPA and its allies are confident that it can do so in its modified form; the case has been laid out most clearly to this point by Harvard law professor (and former White House Counselor for Energy and Climate Change) Jody Freeman in Politico. To get a sense of what the Clean Power Plan’s future holds, it is useful to go through what Freeman says are the five reasons that EPA’s “odds of success [defending the rule in court] just got a significant boost.”

The focus of the rule is now clearly on fossil fuel-fired power plants, not states.

Although EPA’s authority in passing the Clean Power Plan is unsurprisingly centered on power plants as emitters, the proposed rule was strangely focused on states achieving their targets—so much so that I found it difficult to understand how enforcing the rule by means of plant-specific actions could ever work. As Freeman rightly notes, the final rule is much more straightforward on this count: it sets out nationwide carbon efficiency rates for coal and gas generating units, respectively, and makes it clear that compliance consists of meeting those targets (more on where those targets come from below). I agree that this shift in the rule’s structure removes one of its major legal vulnerabilities. Though I would add that I think the change is major enough to make EPA potentially vulnerable to procedural challenges alleging that the agency should have re-proposed the rule and opened it to another round of comments rather than finalizing it as they have done.

EPA relies less on “beyond the fence-line” measures in determining its standards than in the proposal.

The complicated formula for deriving state targets in the proposed rule had four “building blocks,” the fourth of which was promotion of demand-side energy efficiency. Now energy efficiency is out as the fourth block (though EPA is still eagerly promoting it as an optional compliance measure). Since EPA could previously be accused of seeking to go beyond regulating emitters to regulating consumers, and cannot be any longer, Freeman reckons that it has “neutralize[d] this vulnerability.”

As Freeman is quick to note, EPA did not similarly remove another beyond the fence-line measure from its final reckoning of the “best system of emission reduction” (BSER): the third building block, focused on zero carbon renewable energy generation. Renewables receive greater emphasis in the final rule, which Freeman sees as quite defensible:

The EPA’s final rule explains, much more clearly than the draft did, how it conceives of power plants as interconnected, essentially treating them as one giant machine. This new approach basically asks: what can networked sources achieve by taking advantage of emission reduction opportunities already available to them on a regionally interconnected grid? Though this is a novel idea, it also reflects the reality of the power system: grid operators already manage the system by ramping up or down energy from different sources to match supply with demand.

That argument, which EPA develops at length in the final rule (see Section V, p. 282), is plausible-ish sounding, and a court determined to defer to EPA’s expertise might well find it convincing. But Freeman is downplaying just how strange the basic structure of determining the rule’s standards remains. In short, when EPA asks what the “best system of emission reduction” is for a coal-fired plant, it assumes that a part of this “system” includes promoting zero-carbon energy produced by some other generator entirely. That is a strange notion of “reduction”—“substitution” seems to more accurately describe what is entailed—and one that is not at all derived from anything in the Clean Air Act itself. (In general, the Clean Air Act does not seek to reduce pollution by curtailing production.)

It is not at all certain that courts will accept this creativity when power plants inevitably challenge it. That means that the derivation of the efficiency standards at the very heart of the rule remains legally vulnerable.

EPA is much clearer about what will happen if states refuse to create acceptable implementation plans, alleviating concerns about intrusions of state sovereignty.

The proposed rule was quite unclear about what would happen to power plants in states whose environmental agencies refused to produce implementation plans acceptable to EPA: although it was clear EPA could impose a federal implementation plan of some sort, there were big questions about whether EPA might seek to withhold a state’s highway funding or take other punitive measures to compel state cooperation. Freeman notes that the final rule clarifies these matters by spelling out exactly what the federal implementation plan will look like (a cap-and-trade regime applied to the state’s fossil fuel plants) and disclaiming any intention to use other measures. She argues that this should dispel concerns that “the Clean Power Plan is a ‘gun to the head’ and ‘commandeers’ states in violation of the Constitution.” In other words, the claims of unconstitutionality advanced by Freeman’s fellow Harvard Law professor and onetime-Obama-mentor Laurence Tribe, among others, should be weakened.

That strikes me as right—though the constitutional objections have always seemed to me like a long-shot. To the extent that imposing on recalcitrant states a federal cap-and-trade scheme (of the sort Congress failed to pass in 2010) creates problems for the administration, they are most likely to be political rather than legal.

By delaying the first required emission reductions from 2020 to 2022, EPA undermines any claims that a stay is necessary.

EPA badly wants to get this show on the road, even as litigation proceeds, and states could have their compliance planning badly disrupted if courts were to issue a temporary stay of the rule pending final judicial resolution (which might well drag on until 2017 or later). Freeman and others think that the likelihood of a stay, which requires a showing of a likelihood of “irreparable harm” from leaving the rule in place while litigation proceeds, is far less likely now that the rule’s first hard requirements don’t kick in until 2022. That seems sensible enough—though do note that the need for a very slow rollout was one of the criticisms some of us have leveled against EPA’s regulatory approach.

The final rule “explains more comprehensively than the draft did why EPA has the required legal authority.

This one is in the weeds (see pp. 7-10 here for the claim), so I’ll shortchange it here; but basically some statutory language in the Clean Air Act suggests that since power plants are regulated under another section of the law they cannot also be regulated under the section of the law that EPA claims as the authority for the Clean Power Plan. That language is of dubious provenance and meaning, however, and so EPA thinks it is in the clear. We’ll have to see what courts ultimately make of this tangle; frankly, EPA’s clarity in explanation is not the issue, and so the final rule doesn’t change much on this front. It is entirely possible that this could knock the whole rule out.

So, what is the bottom line? As Freeman points out, EPA does appear to be on firmer legal ground on a few matters, and so it is probably fair to say that the final rule is more likely to survive the coming legal challenges than it would have been if it stuck closer to the proposal. But the magnitude of that improvement in the Clean Power Plan’s legal outlook is probably small: at the center of the rule, there is still a very bold legal maneuver without clear statutory sanction, and that means there will be significant doubt about the rule’s legal viability going forward. The D.C. Circuit, and then almost certainly the Supreme Court, will have their work cut out for them in evaluating the many arguments state and industry petitions will bring against this rule.

Author

Philip A. Wallach

Senior Fellow - R Street Institute

Former Expert - Brookings Institution

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