April 11, 2017

The Obama Climate Legacy



Cass Sunstein is one of the smartest guys around and he played a big role in the Obama Administration. In a draft of a forthcoming article in the Harvard Environmental Law Review, Sunstein argues that “one of [the Obama Administration’s] priorities was to address the problem of climate change,” and he concludes: “With a paralyzed Congress, the executive branch proved able, between 2009 and 2016, to use regulatory authorities to take a remarkable variety of steps to reduce greenhouse gas emissions.”

I’m skeptical. The first Obama Administration’s climate policy was largely indistinguishable from George W. Bush’s and it fought having to regulate greenhouse gases almost as hard as its predecessor.  Only after the 2012 election did it show any appetite for actual emissions regulation, and by then it was mostly too little, too late. As I’ve previously noted, the low priority Obama gave to climate issues makes his policy legacy fragile.  While his second administration took some steps to reduce emissions, only about half of them will matter – and, as discussed below, even that may be outweighed by the administration’s mistakes.

Sunstein highlights four sets of regulatory measures and one policy achievement as remarkable steps. Let’s see whether these measures did any good, with one point awarded for each of the five:

Social Cost of Carbon (SCC)   

The idea of calculating the future economic impact of current CO2 emissions – as difficult and as flawed as it is – is an important regulatory concept. Sunstein is justifiably proud of the SCC, and of his role in producing it a little over a year after Obama’s inauguration. It has withstood review from a federal court, the Government Accountability Office, and the National Academies.

However, in only a single Obama-era regulation did the SCC provide the necessary justification in the regulatory cost-benefit analysis.  That regulation – methane emission standards for oil and gas pipelines – is squarely in Scott Pruitt’s cross-hairs.  Even the showpiece Obama effort to reduce CO2 emissions (the Clean Power Plan), EPA’s Regulatory Impact Analysiscalculated that the benefits of conventional pollutant reductions far outweighed the Plan’s compliance costs.  Still, a full point to the Obama administration.

Light-duty vehicle standards

Sunstein is effusive about the benefits of this 2010 rule:

“The EPA and DOT [Department of Transportation] estimated that their 2012–2016 standards would reduce total CO2 emissions by 960 million metric tons over the lifetimes of covered cars and trucks, and at the same time produce 1.8 billion barrels of oil savings. In total, the agencies projected that their standards would reduce greenhouse gas emissions from U.S. cars and trucks by about 21 percent by 2030.”

Remarkably, Sunstein omits any discussion of the role of California’s vehicle greenhouse gas emission standards, which are responsible for 100% of those benefits, beyond an aside noting that “In addition, the United States had to work closely with state governments, above all California, which was planning to impose greenhouse gas standards of its own that could end up driving the national market.”

The only thing EPA gets credit for is granting the required Clean Air Act waiver for California’s standards, a campaign promise that the President ordered EPA to make good on in his first week in office. Once the waiver was granted, California’s standards went into effect in California and more than a dozen other states, comprising about 40% of the U.S. car market. It was the California standards that produced the emissions reductions Sunstein attributes to the subsequent federal rule, because the auto industry had already announced that it would build a “California compliant” instead of one set of cars for states with the California standards and another for states that defaulted to the federal ones. The California standards were the de facto national ones, and the federal standards that followed a year later merely made the California standards the de jure ones as well.

Sunstein then doubles down on the second round of these standards, for model years 2017-2025, which “are expected to reduce greenhouse gas emissions by about 2 billion metric tons, reducing oil consumption by about 4 billion barrels in the process. According to the agencies, fuel savings and other benefits from the standards will far outweigh higher vehicle costs, with annualized net benefits ranging between $19.5 billion and $24.4 billion — and net benefits totaling between $326 billion and $451 billion over the covered vehicles’ lifetimes.”

This time not a word about California’s 2017-2025 standards, which are – again – the de facto national ones. Donald Trump almost certainly will axe the complementary federal standards, but unless he also succeeds in revoking the California waiver, doing so will not add a single ton to U.S. vehicle emissions. No credit to the Obama folks.  

Heavy-duty vehicle standards

EPA and DOT published the first-ever heavy-duty vehicle emission standards in 2011. According to Sunstein, these regulations were “legally optional,” giving the impression that this was pure climate altruism from the Obama Administration.

Not true. In 2007, Congress passed (and George W. Bush signed) the Energy Independence and Security Act, which mandated that DOT (in consultation with EPA and DOE) publish regulations creating a “fuel efficiency improvement program designed to achieve the maximum feasible improvement.” (For purposes of tailpipe standards, fuel efficiency and CO2 emission standards are the same thing.)

Maybe Sunstein’s “legally optional” language refers to the stringency of the standards. After all, the Administration has plenty of leeway to determine what is the “maximum feasible improvement.” But, given that not a single manufacturer sued over the standards, that doesn’t seem to fit either. However, EPA subsequently promulgated a second round of heavy-duty emissions standards, which Sunstein boasts (correctly) “does not appear to be compelled by the CAA.” Half credit on that basis.

Stationary Sources

Sunstein begins his discussion of stationary sources with this:

“After the endangerment finding and associated developments, it seemed fairly clear that the EPA was under a legal obligation to regulate new sources, though the timing was not specified, and a lengthy delay would probably have been possible. With a proposed rule in 2014 and a final rule in 2015, the EPA imposed strict requirements for greenhouse gas emissions from new power plants.” (Emphasis in original)

Each Clean Air Act source category (power plants, refineries, steel mills, pipelines, etc.) has its own set of emission standards, and CAA section 111 says that every eight years EPA must review and, if appropriate, revise them. After the Supreme Court held in Massachusetts v. EPA that CO2 was a “pollutant” under the Act, you might think that EPA would have to add a new standard for CO2 when it reviews each category’s standards.       

However, in a 2008 decision refusing to regulate refinery CO2 emissions, the Bush EPA took the position that section 111 does not require EPA to now include CO2 emission standards. Instead, the only way to create CO2 standards for each of those sources is if EPA voluntarily imposes one. Thus, there is now no way to compel EPA to add a CO2 standard short of petitioning the agency to do so and, if the agency refuses, going to court in the hope that the D.C. Circuit finds that EPA’s decision was “arbitrary and capricious.” Anyone who has ever litigated against EPA knows how mind-bogglingly difficult it is to overcome the great deference courts give to this kind of EPA decision.

A year into the Obama Administration, EPA agreed to reconsider the Bush EPA’s refinery decision. After another year of inaction, EPA signed a settlement agreement promising that it would propose emission standards for both new and existing refineries by December, 2011, and that it would issue a final rule—with appropriate CO2 emissions standards—by November 12, 2012.  

No such standards were ever proposed or finalized. More critically, in its eight years, the Obama EPA never reversed the Bush EPA interpretation that the Clean Air Act does not require that CO2 emissions must be included in the periodic section 111 review. The critical opportunity to reinterpret section 111 has, alas, been completely lost.  Unless the D.C. Circuit can be convinced that the Bush/Trump interpretation is wrong (and EPA will get deference in its reading of the law), any regulation of CO2 from stationary sources now faces a multi-year, steeply uphill slog through the agency and the D.C. Circuit.

Sunstein does not discuss this, but proceeds to discuss the Obama Administration’s 2015 section 111 power plant standards (the Clean Power Plan).  Again, however, he does not say what led up to that rulemaking.

As with the refinery rule, a Bush EPA decision refusing to impose CO2 emission standards on power plants had been remanded by the D.C. Circuit and was sitting around at EPA when the Obama Administration arrived. And that remanded decision continued to sit, and sit, and sit, while the Obama EPA ignored repeated pleas from environmental NGOs and concerned states that it do something.  After more than a year of this, the states and environmental groups threatened to sue to force EPA to comply with the remand order (friendly sue-and-settle this was not). EPA finally signed a settlement agreement in December, 2010, agreeing to issue proposed rules for both new and existing power plants by July, 2011, and final rules for both by May, 2012.   

EPA then proceeded to ignore the Settlement Agreement (a habit with the Obama EPA). It did not propose new plant standards until March 2012, and did not propose any standards for existing ones. But then, in response to coal industry objections (during an election year), EPA withdrew the proposed standards and did not come up with a replacement until 18 months later. EPA finally proposed existing plant standards—the Clean Power Plan—in June, 2014, three years after it had promised to do so.  

Because the new and existing plant standards were not finalized until 2015, they were still in court when Donald Trump took office. As a result, the Trump EPA will make sure that they are never implemented. Using the same three-year process to get to a final rule, if the Obama Administration had started work on these in 2009, they would have been done by 2012, and the legal challenges over and done with years ago. I’d assign negative credit but I’ll stick with just a zero.  

Appliance standards

I have no issue with anything Sunstein says about the fourth regulatory program he discusses, the Appliance and Equipment Standards Program, except for his boast that, “According to one estimate, these and other energy efficiency standards are expected to produce annual CO2 savings of 345 million tons by 2020.” He cites a DOE fact sheet, but agency estimates of their own achievements are notoriously inflated, and this estimate is 60% higher than the 216 million ton official estimate the U.S. submitted to the UNFCCC. But give them full credit anyway.

Conclusion  

My assessment: 2.5 points out of a possible 5.

The Obama Administration simply did not make climate a priority, wasted enormous amounts of resources in its doomed power plant regulations by ignoring pleas (and violating agreements) to get these done sooner rather than later, and handed the Trump EPA an excellent excuse for doing nothing about any other sources by letting the refinery rule stand.

History will judge.