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High waves come close to reaching a cafe after lifeguards closed the pier due to the large swells in Ocean Beach, California, U.S., January 9, 2019.      REUTERS/Mike Blake - RC176229A9E0

Where does US climate policy stand in 2019?

Editor's Note:

This report is part of the Series on Regulatory Process and Perspective and was produced by the Brookings Center on Regulation and Markets.

To think about federal climate policy these days is to think about the future. Will we see Democrats embrace a radical program like the Green New Deal? Or will elites of both parties come to see a carbon tax as an attractive means of raising revenue, as a diverse group of former heads of the Council of Economic Advisors and Nobel Prize winners recently urged?

Focusing on 2021 and beyond is quite reasonable. The Trump administration has clearly opposed the climate policies of its predecessor, and there is no reason to expect legislative action of any kind during the 116th Congress. It would seem there is not much to know about American climate policy in the present.

Author

Philip A. Wallach

Senior Fellow - R Street Institute

Former Expert - Brookings Institution

At the highest level, that’s fair. But when we think about where American climate policy can go in the future, it matters quite a lot just how the Trump administration has gone about trying to reverse the Obama administration’s policies, and where American law actually stands today.  Keeping track of the administration’s legal maneuvers—and their opponents’ counters—can be challenging, and so this brief report attempts to offer a comprehensive snapshot of where the nation’s climate policies stand today. It stands as a climate-focused supplement to the Brookings Deregulation Tracker.

Paris Climate Agreement

The Paris Climate Agreement came out of the 21st session of the United Nations Climate Change Conference in December 2015, and went into force on November 4, 2016. The United States was one of the principal drivers of the compromise, and President Obama hailed it as “a tribute to American leadership.” As a candidate for president, Donald Trump criticized the agreement as a bad deal for the American people and pledged to withdraw the United States if elected. In June 2017, he announced he would be following through with that promise, though he also (confusingly) said he would immediately start negotiations to reenter the climate accord on better terms.

Legally, however, Article 28 of the Paris Agreement specifies that a country cannot initiate a withdrawal until three years after the agreement has gone into force—i.e., for the United States, November 4, 2019. That decision would go into effect another year later. As it happens, that would put the expected official U.S. exit from the agreement one day after the next presidential election. If a Democrat were to defeat Trump in November 2020, it then seems likely that the U.S. might leave the agreement and then reenter within a matter of months. If Trump is reelected, we would have to see whether his initial insistence that he would be negotiating a new deal for the United States actually signaled an intention to remain engaged with international climate politics, or whether it was simply bluster.

In more practical terms, the effects of the U.S. hokey-pokey on the Paris Agreement (put your left foot in, take your right foot out) aren’t entirely clear. Many U.S. states and cities responded to Trump’s withdrawal announcement by putting in place their own commitments. The non-binding nature of countries’ commitments under the agreement means that, throughout the world, other actions must ultimately drive emissions below what unguided market behavior would dictate. But, in the longer term, most experts agree that the orientation of the U.S. toward the Paris Agreement will be an important factor in determining whether the compact leads to a virtuous cycle of ambitious emissions reduction strategies around the globe.

Mobile Sources

The two largest sources of carbon emissions in the U.S. are the power and transportation sectors, which the Clean Air Act treats as stationary sources and mobile sources, respectively. According to the Environmental Protection Agency (EPA), light-duty vehicles are responsible for 60 percent of transportation emissions, followed by medium- and heavy-duty trucks at 23 percent, and aircraft at 9 percent.

The main regulatory program for automobiles is the Corporate Average Fuel Economy (CAFE) program, which has been in place since 1975. The Energy Independence and Security Act of 2007 dictated that vehicle fleets for model years 2021-2030 would have to achieve “the maximum feasible average fuel economy standard” to be defined by the Department of Transportation as in cooperation with the EPA. Early in the Obama administration, CAFE was selected as the primary means of limiting mobile source carbon emissions. Rules finalized in October 2012 put in place binding standards through Model Year 2021 and offered estimated standards through 2025.

Before leaving office in January 2017, the Obama administration issued a final determination making its previous estimates binding, provoking angry criticisms from automakers who felt that the review process leading up to the termination had been rushed and had arrived at an unrealistic conclusion about what was really feasible. The Trump administration vowed to reverse the determination and ultimately did so in April 2018, immediately provoking lawsuits by a coalition of blue state attorneys general. They proposed a new, less-stringent set of determinations, dubbed the Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, in August 2018 that has yet to be finalized. An attempt to defuse litigation through negotiations with the California Air Resources Board recently failed.

The Trump administration’s actions on CAFE standards are likely to remain consequential even if they are eventually overturned by courts or by a Democratic administration in 2021. Because auto manufacturers need considerable lead time to be able to make decisions about the compositions of their fleets, it seems hard to imagine that they could end up being held to the standards dictated by the outgoing Obama administration after a years-long interregnum of legal uncertainty. Suppose that the Trump standards survive legal scrutiny but a Democrat becomes president in 2021. Pivoting once again toward more stringent carbon emission standards for cars is likely to take at least a year, likely more.

It is worth briefly noting other mobile source rules in play. In 2016, the Obama administration put carbon emissions standards for heavy-duty trucks in place through model year 2027. Although former EPA Administrator Scott Pruitt indicated a willingness to reconsider those rules, they are still currently in place. Under the Obama administration, the EPA issued an Endangerment Finding for carbon emissions from aircrafts in 2016. Given the terms of the Clean Air Act, that means the agency is obligated to regulate those emissions. However, no action was taken by the end of the Obama administration, and none has yet been taken by the Trump administration.

Stationary Sources

The centerpiece of the Obama administration’s climate policy was the ambitious and highly controversial Clean Power Plan, the rule for emissions from already existing power plants. It was proposed in 2014 and finalized in October 2015. Although the administration made major changes to the rule in an attempt to ensure that courts would view it favorably, it always rested on an awkward legal foundation. That was because the Clean Air Act regulates each source of emissions individually, but the Clean Power Plan essentially sought to regulate the power sector as a coherent whole, all but requiring that fossil-fuel-fired plants subsidize renewable energy. In an extraordinary action taken just before the death of Associate Justice Antonin Scalia in February 2016, a 5-4 majority of the Supreme Court issued a stay on the Clean Power Plan effective until all legal challenges to it were completely exhausted. In other words, the court put the Obama administration’s most ambitious action to combat global warming on ice.

The election returns in November 2016 ensured that it would not be resuscitated immediately. Courts backed off to give the Trump administration room to work its will, knowing that issuing a final ruling on the Obama administration’s policy was probably moot. And, indeed, the Trump administration proposed a rescission of the rule in October 2017 and proposed a replacement, dubbed the Affordable Clean Energy Rule, in August 2018. At present, neither of these rules have been finalized; both are certain to face legal challenges. That leaves the old Clean Power Plan in a state of legal limbo, clearly inactive but not yet technically off the books.

Some critics of the president’s policies seem to think that the Clean Power Plan might simply be unfrozen in the future and set back upon its way. For example, the Natural Resources Defense Council has opposed what it calls the Trump administration’s “Dirty Power Plan” and features a web page appealing to potential donors to “Save the Clean Power Plan.” Senator Dianne Feinstein, meanwhile, recently put forward an alternative to the much-touted Green New Deal, which included a call to restore the Clean Power Plan and its 2030 goals.

But does such an objective make any sense in 2019, three years after the original stay was issued? The final Clean Power Plan was to impose its first binding emissions limits as of January 1, 2022, which may seem to give time to see it reinvigorated by a Democratic president in 2021. But any return to the Obama administration’s policy would, at least, require a continuation of the legal battle put on hold in 2017; supposing (as is likely) the Trump administration does eventually finalize its rescission of the rule, returning to the old rule would require its own rulemaking process that would take at least a year. Just as importantly, as in the case of CAFE standards, long lead times are necessary for compliance, making it unlikely that any plant could be put on a compliance schedule as short as a year. One might plausibly imagine a modified Clean Power Plan with a later starting date, but, once again, because particular standards for particular dates are the very essence of the rule, such a shift would entail an entirely new rulemaking effort. A new administration might choose to pursue a path of continuity with its last Democratic predecessor, but, then again, they might want to craft their own signature climate policy from scratch—especially since the Clean Power Plan’s impact at this point is predicted to be so modest when compared to market forces, as Howard Gruenspecht explains in a recent Brookings analysis.

Rules for existing power plants are not the only stationary source rule at issue. The Trump administration proposed to replace the Obama EPA’s rule for new and modified power plants in December 2018, putting in place a much less stringent standard for coal plants. Rules for oil refiners are also required by the Clean Air Act, but the Obama administration never got any in place. Other potential areas for regulation include cement production and the agricultural sector.

Litigation

While the legal challenges to the Clean Power Plan were frozen much like the rule itself, other legal developments have been progressing, with the potential to reshape the whole regulatory landscape for climate change issues. It is fairly unlikely that these developments will ultimately dictate the shape of climate policy to come—but it seems more likely today than it did just a few years ago. Several types of lawsuits are worth tracking—with the Sabin Center for Climate Change Law providing excellent resources for doing so.

First, there are lawsuits that seek to force the United States government to take aggressive action, at least partly in the form of regulation, to combat climate change. Plaintiffs in these lawsuits bring various theories of why courts should listen to them. In the most prominent case, Juliana v. United States, young plaintiffs alleged that the U.S. government has violated their constitutional rights to life, liberty, and property through its own climate-change-causing acts. Much to the surprise of most legal observers, that case survived a motion to dismiss in November 2016, when a District Court judge in Oregon found that the case could proceed to trial. It has since become entangled in a thicket of dueling motions, with a scheduled trial postponed. If plaintiffs can win at trial and withstand appeals in the Ninth Circuit, it is all-but impossible to imagine them winning in the Supreme Court. Nevertheless, the case has become a major rallying point for climate activists (and an object of fascination for mainstream media), and any additional victories in lower courts could have the effect of amplifying dissatisfaction with the status quo. Another case in the Eastern District of Pennsylvania, pursuing a similar theory, was recently dismissed, with the judge declaring: “Because I have neither the authority nor the inclination to assume control of the Executive Branch, I will grant defendants’ motion.”

Other lawsuits allege specific harms and seek compensatory monetary damages, to be paid by the largest fossil fuel extraction companies, rather than asking courts to guide policy. For example, California’s San Mateo County has sued Chevron, alleging that sea level rise caused by the burning of fossil fuels is destroying its citizens’ property, and that the oil company intentionally concealed evidence and misled the public of these harms. Such cases bear a resemblance to the cases brought against tobacco companies by states’ attorneys general, which eventually led to the Master Settlement Agreement; plaintiffs likely seek to duplicate that kind of high-dollar negotiated settlement, even if it requires fundamentally reshaping the limits of tort law.

Non-governmental plaintiffs have also begun testing the waters of damage suits against fossil fuel companies. Pacific coast fishermen allege that oil companies have created a public nuisance that resulted in “prolonged closures” of crab fisheries. None of these cases have yet to break through, and many have been dismissed. But if a single jury were to assess monetary damages, the oil companies’ willingness to tolerate the current fragmented legal status quo might quickly end, making them enthusiastic proponents of any legislative bargain that barred such claims.

Yet another set of cases seeks to use securities law as the means of holding fossil fuel companies accountable, by alleging that they defrauded their investors by failing to disclose the known risks of climate change. It may seem odd to say that the oil company shareholders’ interests are the ones in need of vindication, but this is part of a larger phenomenon in which (as Bloomberg’s Matt Levine often says) “everything is securities fraud.” In other words, securities law has become the mechanism used to punish public corporations for their sins whenever other means of doing so are inconvenient. By far the most important of these cases is the one filed by the Attorney General of New York against Exxon Mobil in October 2018, after a three-year long investigation led by former state Attorney General Eric Schneiderman. Brought under New York law and now overseen by Schneiderman’s successor, Letitia James, the case contends that Exxon’s public predictions of future regulatory costs related to climate change diverged from those that it relied on privately, thereby deceiving its investors. A trial is set for late 2019.

One of the most important questions for future efforts to address climate change will be their orientation toward all of this pre-existing legal action. Promising to end it (at least at the federal level) would be a major inducement for industry support.

State Actions

As the regulatory landscape for climate is shaped by developments at the EPA and in federal courts, it is also important to remember that state and local legislatures have been active even if Congress has not. As Barry Rabe describes, climate action in the states is clearly polarized, with some blue states deeply committed to cutting emissions within their borders. Their efforts include California’s cap-and-trade system as well as the Regional Greenhouse Gas Initiative (RGGI) in the northeast, which now has 9 member states. But, looking more broadly, states that have not traditionally made cutting carbon emissions a priority don’t seem to be rushing to do so lately. So the parts of the country with the highest emissions rates are often those doing the least—which may be politically unsurprising, but is nevertheless quite unfortunate from an economic efficiency standpoint.

Looking to the future

So what is the bottom line, when we consider how U.S. climate policymaking will proceed after the 2020 election?

If President Trump wins reelection, the policy landscape will remain fragmented and mired in litigation, with every administration attempt to reduce the stringency of emissions controls fought out in courts. Barring some dramatic reversal on the part of the president or Republicans in Congress, we would expect four more years of federal policy stagnation. This might well make judges more likely to allow aggressive legal actions in court; in any case, it would not bode well for a coherent national climate policy.

If a Democrat defeats Trump, his or her administration would probably take a two-track approach to climate policy. First, the Department of Transportation, EPA, and other agencies would use their powers to pick up where Obama administration policies left off. Because this path allows for action without figuring out congressional politics, it seems like the “easy” way of moving forward, but as the Obama administration’s struggles showed, it can be a long slog, even as it fails to put to rest legal uncertainty. That makes the second path, through congressional legislation, more urgent. There is no question that putting together a comprehensive climate policy will be a difficult political feat—even if Democrats control the House and Senate, as they did in 2009-2010. But, with talk of a Green New Deal unlikely to disappear, a Democratic president would feel tremendous pressure to deliver a significant deal. He or she would probably be willing to use the executive-centered actions as bargaining chips (in addition to providing clearer limits on liability), even if environmentalists might object to relinquishing any potential tool.

In either scenario, the developments during the remaining two years of President Trump’s first term will significantly shape each side’s leverage. The Brookings Center on Regulation and Markets will continue to cover these developments closely.

Philip Wallach is a senior fellow in the governance project at the R Street Institute. The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. He is currently not an officer, director, or board member of any organization with an interest in this article.

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