November 14, 2016

Does Trump spell climate doom?



It was a rough election night for those in favor of aggressive action on climate change. The President-elect is committed to withdrawing from the Paris agreement , cancelling the EPA’s Clean Power Plan (CPP), and making coal great again.  To rub salt in the wounds, a carbon tax proposition was also defeated by a large margin in Washington State. Even so, doom and gloom from the climate-concerned is overblown. There are significant legal and political obstacles that will prevent the new administration from securing all that may be on its anti-climate wish-list. Moreover, the inertia in the energy system, which has heretofore been an enemy of climate progress, will likely turn out to be an important near-term friend.

First, the bad news: the Paris commitment is dead. President-elect Trump has a number of ways of killing it, the most effective of which is simply to submit it to the Senate for ratification, which will vote it down. That lets President Trump shift the blame while also setting the (non-binding) precedent that any future such deals also need Senate approval.  The United States repudiation of its Paris commitment will damage the international climate process and prove to be the most destructive climate action that he can take.

Second, the good news, beginning with the political fundamentals. Donald Trump lost the popular vote narrowly, and won several key states by very thin margins. There is another Presidential election in 2020. The Republican hold on the Senate is precarious (52-48) and a discontented electorate in 2018 may end it.  Even if the Republican House-Senate-Presidency lasts throughout the next four years, this is the exact same situation as under George W. Bush in 2003-2006, when Senate Democrats were able to block various legislative attempts to roll back federal environmental laws. Democrats who decried the gridlock checks and balances caused in the Obama years will come to recognize the reasons the Founders created them.

There is the very real danger, however, that Congress will seek to repeal or sharply curtail EPA’s greenhouse gas regulatory authority in order to 1) avoid any court order to regulate, and 2) tie the hands of future Administrations. Such authority was not an issue back in 2003-06 because the Bush EPA took the position that the Clean Air Act did not cover greenhouse gases, and it was not until 2007 that the Supreme Court said otherwise in Massachusetts v. EPA (at which point the Democrats controlled both Houses).

Normally, any such ambitious attempt to roll-back regulatory authority would be filibustered, but there are parliamentary mechanisms (such as the dreaded “budget reconciliation” process) that avoid normal procedure and prohibit filibusters. In that case, the Democrats are going to have to ensure that Joe Manchin votes with them (unlikely) and find three Republicans who will join them, each of whom will be under enormous pressure from both sides. Alternatively, the Republicans might simply take a page from the Democrats, who eliminated the filibuster for almost all Presidential nominees, and eliminate it for legislation as well.  If the Republicans go that route, we would be faced with far greater threats than elimination of Clean Air Act authority.

Assuming EPA authority stays intact, we imagine that the Trump Administration will focus on regulatory rollbacks that can be accomplished by agency rulemaking. And while the Clean Power Plan is a dead letter for reasons explained below, every other such executive action will be litigated and delayed. The environmental NGOs’ law departments are getting back into their 2003-2006 mode even as we write this. Not only were the great majority of similar Bush agency actions overturned by the courts, but the current makeup of both the D.C. Circuit and the other federal appellate courts are significantly more favorable to environmental litigants than they were a decade ago.

Moreover, even getting such regulatory actions completed will face two significant hurdles.  Voting in D.C. and in the surrounding counties in Maryland and Virginia produced huge (up to 80% or more) Hillary majorities. That tells you that the goodwill in the ranks of federal government employees towards the new administration will be very low. As we saw in the Bush era, that is a recipe for strategic leaks, slow-walking initiatives, and strong internal opposition / debates.

These kinds of regulatory rollbacks can perhaps be done over the protests of permanent employees if there is strong interagency leadership from capable political appointees, which will take time to get into place.  The multiple fiascos over spending stimulus money effectively under President Obama showed clearly how—even with willing employees—the lack of capable and experienced leadership prevents policy from being implemented.

Finding competent political appointees, however, will likely be an issue.  While there will be some closing of ranks among Republicans, and there is certainly a pool of capable people—albeit in much smaller jobs—in the states, given the history of the Trump campaign, many of the experienced Republican-leaning environmental or energy experts who have been working on K Street since 2008 may be reluctant to serve in a Trump Administration.

All that being said, the Clean Power Plan is dead.  Regardless of whether the Trump EPA waits for the D.C. Circuit decision, the easiest thing for it to do is first amend the rule to provide that, once the judicial stay of the CPP is lifted, the states will have an extended period (say, 5-7 years) to submit their implementation plans, which effectively kills the CPP.  The timing of the steps in a regulatory process is as close to an unreviewable agency action as there is, and no court would overturn it.  Even assuming that the D.C. Circuit then upholds the Rule, EPA could then withdraw the CPP for reconsideration, and thereafter issue a new rule based only on modest inside-the-fence actions. Environmental NGOs and the states supporting the CPP would challenge this, but since there is a legitimate legal argument that EPA’s authority ends at the fence-line (and with 27 states supporting this new interpretation) the D.C. Circuit would, in our view, likely defer to EPA’s new reading. EPA could also decide that it was barred from regulating CO2 emissions from power plants because of the “Section 112 argument”, but that would lead to the revival of the tort cases seeking to hold the power companies liable for climate change damages.

It is worth noting that the fact that there is a legitimate argument for why EPA can’t regulate beyond the fence-line is what distinguishes this CPP scenario from, say, any attempt to reverse the endangerment finding, which would be doomed to failure given that such a reversal must explain how its new analysis is correct. In fact, environmental NGOs might secretly welcome such an attempt. Not only would EPA resources that might otherwise be devoted to wrecking more vulnerable programs be engaged in a pointless exercise, but this would be a tremendous organizing, fundraising, and media opportunity for the green lobby.

Regardless, getting rid of the CPP is not going to have much of an effect on steadily-declining power sector emissions. As EPA has indicated, the CPP would have little real impact on emission paths in the early years, as low gas prices and state renewable mandates have done most of the work already. There is no sign either will change soon and technology (e.g. LED streetlights) is driving electricity demand reductions in ways that will probably continue.

In addition, the most important renewable tax breaks have been extended through 2020 and 2021, i.e. beyond the first Trump term. We do not think it is likely that Congress would have any appetite for repealing those, as they were the result of a bipartisan deal and there are actually strong renewables supporters (think Chuck Grassley) on the Republican side of the aisle. Even so, environmentalists should not mourn the loss of these or other “green” subsidies, if indeed Congress gets round to doing it, since they are for the most part ineffective and wasteful.

Ironically, Trump’s reputed interest in freeing-up permitting of energy infrastructure (e.g., gas pipelines and drilling on public lands, if indeed it can be achieved) may have the paradoxical effect of further reducing emissions. It could make it easier to get currently very cheap Marcellus / Utica gas into the center of the country and perhaps even increase overall natural gas output. This can have only one outcome; reduced national gas prices overall and less coal consumption.

It also seems unlikely that any rational utility or PUC, knowing the certainty of NGO / grassroots opposition and, more importantly, the likely temperament of the next administration, will risk billions of dollars to build new coal plants. Older coal plants will continue to be hamstrung by the cost of complying with non-climate pollution rules (such as the ozone air quality standards), plus the perhaps even lower price of natural gas.  In other words, the actual reasons for coal’s decline are not going away, even if the “war” is over.

Which brings us, finally, to the opportunity side of the equation. Donald Trump’s more positive reputation is as a man who likes to make a deal. He’ll be looking for a way to get his infrastructure ideas and tax reform plans implemented. That requires a lot of money. There aren’t going to be many popular ways to do that. Is it too much to hope that a smart Democratic negotiator might see an opportunity to get a return for things that are already lost, like trading EPA greenhouse gas regulatory authority for a carbon tax to help fund the infrastructure build-out or tax reform?

The latter point is posited on rational acting by political figures on both sides of the aisle whose track record gives us little confidence. But assuming that Congress does not eliminate (save as part of a carbon-tax deal) EPA’s greenhouse gas authority under the Clean Air Act -which would severely hinder future Democratic Administrations, as they would need to control both houses to restore it- the ability of a Trump Administration to set back U.S. climate progress is going to be limited.