July 2013

Sometimes, the sub-headline says it all.

The Wall Street Journal published a telling article yesterday, titled (online) “BMW Launches Its First Mass-Production Electric Vehicle.” That’s a good summation, but the true lede was buried in the sub-headline: “Auto Maker Needs to Boost Sales of Electric Cars To Meet Regulatory Requirements.”

As the sub-headline suggests, BMW didn’t build the i3–the titular electric car–because it plans on making money. In fact, according to reporting by the Wall Street Journal’s Joseph White, ‘The i3, which starts at €34,950 in Germany, could lose €197 million a year on an operating basis…’ So the car is a loser.

BMW’s launch of its new i3 is actually quite instructive on current events. This morning, we reported that newly confirmed EPA administrator Gina McCarthy believes that climate change regulations are an economic stimulus. The i3 is proof to the contrary.

Instead of meeting actual demand, BMW is selling the i3 to meet mandates. In the American market, President Obama’s EPA in 2010 established greenhouse gas regulations that effectively require fuel efficiency improvements. The European Union had already implemented the same sort of regulations. Thus, the international car market has been skewed by the hand of government. BMW, by building the i3, is reacting to this dirigisme. BMW Chief Executive Norbert Reithofer told the WSJ that, “If you look around the world, [at] the emissions regulations, in the United States, in the European Union, even in China…cars like the BMW i3 are a must.” Simply put, the BMW i3 is a real-world industrial response to EPA climate regulations.

Yesterday, EPA administrator McCarthy said the President’s climate plan was ‘an opportunity to “bend the curve” and could “fuel the complementary goals of turning America into a magnet for new jobs and manufacturing.”’ As I explained in the previous paragraph, the agency already has “bent the curve” of the auto market, and the result of these market manipulations is a car company that builds a money-losing car for non-existent customer demand.

Does this sound like wise economic policy?

EPA administrator Gina McCarthy gave her first public speech in her new role yesterday, before the Harvard Law School. In it, she explained that there’s a big misunderstanding among the American people about Obama’s authoritarian climate policies. A lot of us—myself included!—had presumed that the purpose of EPA regulations is to “do something” about global warming.

Wrong!

Administrator McCarthy told Harvard law students that EPA regulations to control greenhouse gas emissions have a purpose altogether distinct from global warming.  “The truth,” she said, “is we need to embrace cutting carbon pollution as a way to spark business innovation. We need to cut carbon pollution to grow jobs. We need to cut carbon pollution to strengthen the economy.”

OK….Climate regulations aren’t about the climate; rather, they’re about “growing jobs” and “strengthening the economy.”  Which makes sense only in newspeak.

As an aside, McCarthy’s use of Orwellian language is apt. Any cog of authoritarianism worth her salt will tell you that propaganda is paramount. In a June 25 speech unveiling an authoritarian climate plan, President Obama announced that Congressional inaction on policy is a pretext for the Executive to enact that policy by administrative fiat. Administrator McCarthy was quick to follow orders.

This economic stimulus, moreover, is to be executed not by the Federal Reserve, nor the Treasury Department, but by the Environmental Protection Agency. Talk about mission creep!

As reported by GreenWire’s Jason Plautz, McCarthy said the President’s climate plan was ‘an opportunity to “bend the curve” and could “fuel the complementary goals of turning America into a magnet for new jobs and manufacturing.”’

Of course, she’s got it backwards. Since 2009, EPA has been “bending” the curve in electricity markets by breaking the back of coal, thereby destroying jobs*and manufacturing.

*Jobs are a poor metric relative to wealth creation, but it’s always an affront to common sense whenever the executive branch imposes politicized regulations that destroy jobs.

In a June 25 speech unveiling a new, authoritarian climate plan, President Obama explained that Congressional inaction was a pretext for his administration to fight global warming by executive fiat.

Newly-confirmed EPA Administrator McCarthy got the message loud and clear. According to InsideEPA, McCarthy said in a July 22 video memo to agency employees, “We have a clear responsibility to act now on climate change. That’s what President Obama has called on us, and the American people, so that we protect future generations.”

It is noteworthy that she didn’t mention the Congress. By significant bi-partisan margins, cap-and-trade policies have died repeatedly in the Senate. Of course, EPA’s authority to regulate climate change is derivative of the Clean Air Act. And yet, as my colleague Marlo Lewis has explained aptly,

EPA claims that its greenhouse-gas regulations derive from the CAA as interpreted by the Supreme Court in Massachusetts v. EPA*. But in the last Congress, after almost two decades of global-warming advocacy, Congress declined to give EPA explicit authority to regulate greenhouse gases, when Senate leaders mothballed cap-and trade legislation. A bill authorizing EPA to do exactly what it is doing now — regulate greenhouse gases under the CAA as it sees fit — would have been dead on arrival. The notion that Congress gave EPA such authority when the Clean Air Act was passed in 1970, years before global warming emerged as a public concern, defies both history and logic.

*[As an aside, the Supreme Court is now in the process of determining whether it will revisit Mass v. EPA by choosing to review the D.C. Circuit’s decision to uphold EPA’s climate regulatory regime.]

There’s another troubling aspect to McCarthy’s video memo. In it, she said that the agency will be taking an “all hands on deck” approach to implementing regulations to reduce greenhouse gases. Specifically, MCarthy was speaking about diverting EPA’s limited resources into a regulation known as the New Source Performance Standards for greenhouse gases. Here’s the problem: This regulation is a discretionary responsibility. That is, EPA chose to do it. The Agency didn’t have to.

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EPA’s power relative to the States increased last Friday when the 10th Circuit Court of Appeals, by a 2-1 majority decision, ruled that the agency acted reasonably when it disapproved Oklahoma’s Clean Air Act plan to improve visibility. As I explain below, the court’s majority opinion in State of Oklahoma, et al. v EPA is questionable because it hinges on the credibility of an “independent” consultant hired by EPA. In fact, this consultant is biased and unqualified. She is a go-to, anti-coal litigation witness for environmental organizations like the Sierra Club, and, more importantly, her analysis is demonstrably wrong.

At issue is a Clean Air Act regulation known as Regional Haze. Amended to the law in 1977, the purpose of the Regional Haze program is to improve the view at National Parks and other federally-designated areas. Because it is an aesthetic regulation—and not a public health mandate—the Congress granted States a unique degree of power vis a vis EPA, relative to other regulatory regimes established by the Clean Air Act.

The Regional Haze rule’s most significant regulatory mandate is known as Best Available Retrofit Technology (BART). The Clean Air Act requires that States determine BART for all fossil fuel plants built between 1962 and 1977.

In 1999, the Clinton administration EPA promulgated rules for establishing BART. These rules were challenged by States and industry for being insufficiently deferential to States’ unique prerogatives under the Regional Haze program. In a 2002 decision, American Corn Growers v. EPA, the D.C. Circuit Court of Appeals agreed with the petitioners, and remanded the rule to the agency. The court’s opinion explained that, “states…play the lead role in designing and implementing Regional Haze programs” generally, and that, in particular, the Clean AirAct “giv[es] the states broad authority over BART determinations.”

The legal history is clear: Congress wanted States to choose BART.

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In some cases, neither the spoken nor written word is able to capture the emotional destruction wrought through disastrous public policy as does a simple tune. Perhaps this is why America was captivated when Jimmy Rose, enthralled audiences with a resounding refrain– “Coal Keeps the Lights On”:

From the coal mines of Kentucky to the battlefields of Iraq, Rose’s life lends credence to the message in his lyrics to provide the country a profound glimpse into the plight of the Appalachian coal worker.

Now, performing before a national audience last week on America’s Got Talent, Rose used his Coal Song to raise the spotlight further – perhaps Washington will take heed. The song marks a clear outcry against the Administration’s war on coal, which has endangered the very livelihood of coal workers in Appalachia.

Sadly, this message, so far, has seemed to have failed to reach the ears of the Obama Administration whose reckless policies and continual output of regulations match the pace of the continual decline in coal output and jobs. For years coal miners have been expressing their displeasure with the Administration. And, while Rose has brought the issue to the national stage, the calls of “Coal Keeps the Light On” are familiar a sight in this corner of Appalachia.  In an article last year, the NYTimes reported:

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EPA has the most onerous regulatory agenda of all Federal Agencies. According to CEI’s Regulatory Report Card, EPA regulations cost the US economy $353 billion per year. Many of these costs are forced onto consumers in the form of higher energy prices. Such astronomical amounts are nearly double the second most expensive agency, Health and Human Services. Given the egregious results of unlimited regulatory authority, it comes as no surprise that the House of Representatives will this week debate and vote on the Energy Consumers Relief Act of 2013 to staunch the excessive burdens on consumers.

The Energy Consumer Relief Act requires EPA to submit the estimated costs and job impacts of all energy related regulations in excess of $1 billion. Moreover, the Act gives the Department of Energy authority to block any regulations deemed to have significant economic impacts.

EPA for far too long has had meager oversight. With the revelations of former EPA Administrator Lisa Jackson’s false email accounts, as well as a significant power grab against state’s rights through regulatory disapproval, it is no surprise the House is likely to vote for stricter accountability.  Enacting inter-agency review to check the seemingly inexorable growth of EPA would be a strong step towards reasserting Congressional oversight over an out-of-control bureaucracy.

Unfortunately, the Democratic-controlled Senate is unlikely to consider this good-government legislation.