The public comment period for EPA’s proposed rule titled Clean Energy Incentive Program Design Details closes on September 2, 2016. I intend to submit comments on behalf of the Competitive Enterprise Institute and other free-market groups. We will argue that EPA has once again exceeded its statutory authority. The gist of the argument is available here and here.
Among other evidence, we will cite regulatory comments that no longer exist on agency Web sites. To ensure those sources have active links, I post several below. But first some background.
Credit for Early Action, CEIP, and the Stay
The Clean Energy Incentive Program (CEIP) is what’s known in climate policy parlance as an “early action credit” program. The CEIP’s core function is to jumpstart compliance with EPA’s so-called Clean Power Plan (CPP)–the agency’s carbon dioxide (CO2) emission standards for existing fossil-fuel power plants. EPA proposes to award extra emission allowances and emission rate credits to states that increase renewable electric generation and/or reduce electric demand in the two-year window before the start of the CPP compliance period (originally scheduled for 2022-2030).
Credit for early action was an issue of recurring controversy during the late 1990s and early 2000s, and understandably so. Despite proponents’ claims that early action crediting was a “third way” between the Kyoto Protocol and “inaction,” the policy was a less-than-subtle strategy to establish the accounting framework for a carbon cap-and-trade system and grow a corporate lobby for Kyoto-style energy-rationing. See this paper for details.
However, one thing almost all stakeholders eventually agreed on is that no existing statute authorizes any federal agency to award regulatory credits for “early, voluntary” greenhouse gas reductions.
On February 9, 2016, the Supreme Court put a stay on the CPP pending final resolution of litigation in which 27 states and numerous industry and non-profit organizations are petitioning to overturn the rule. That was an extraordinary step–the first time the Court stayed an EPA rule before a lower court had a chance to review it.
So in proposing the CEIP Design Details rule, EPA intends to implement a program that has no validity apart from the Clean Power Plan, for the purpose of accelerating compliance with the CPP, even though the CPP has been stayed by the Court. Whatever else might be said about EPA, the agency does not lack for chutzpah.
Neither the final CPP, the CEIP fact sheet, nor EPA’s proposed CPP federal implementation plan discusses the CEIP’s statutory basis. Similarly, the proposed Design Details rule asserts rather than explains the CEIP’s statutory basis:
The CEIP is an optional component of the Clean Power Plan, and the Clean Power Plan is an exercise of the EPA’s authority under section 111(d) of the CAA, 42 U.S.C. 7411(d). (81 FR 42944)
Below are links to and excerpts from relevant but now almost-forgotten legislative proposals, expert analyses, and comment letters from the heyday of early action credit advocacy. The legislative proposals are pertinent because all seek to give “the President” (i.e. the executive branch) authority lacking under current law, and none was enacted. Indeed, none attracted enough support to be marked up in committee or scheduled for floor action.
Legislative Proposals
S. 2167, Credit for Voluntary Early Action Act (105th Congress, October 2, 1998, Sens. Chafee, Mack, and Lieberman):
- Subtitle–To amend the Clean Air Act to authorize the President to enter into agreements to provide regulatory credit for voluntary early action to mitigate greenhouse gas emissions” [emphasis added].
- The purpose of this Act is to encourage voluntary greenhouse gas emission mitigation actions by authorizing the President to enter into binding agreements under which entities operating in the United States will receive credit, usable in any future domestic program that requires mitigation of greenhouse gas emissions, for voluntary mitigation actions before 2008 [emphasis added].
S. 547, Credit for Voluntary Reductions Act (106th Congress, March 4, 1999, Sens. Chafee, Mack, Lieberman, Warner, Moynihan, Reid, Jeffords, Wyden, Biden, Collins, Baucus, Voinovich):
- Subtitle–To authorize the President to enter into agreements to provide regulatory credit for voluntary early action to mitigate potential environmental impacts from greenhouse gas emissions [emphasis added].
- The purpose of this Act is to encourage voluntary actions to mitigate potential environmental impacts of greenhouse gas emissions by authorizing the President to enter into binding agreements under which entities operating in the United States will receive credit, usable in any future domestic program that requires mitigation of greenhouse gas emissions, for voluntary mitigation actions taken before the end of the credit period [emphasis added].
Rep. Rick Lazio (R-NY), floor statement introducing H.R. 2520, the companion bill to S. 547 (Congressional Record, July 14, 1999, E1542-43):
- It [H.R. 2520, the Credit for Voluntary Reductions Act] is simply authorizing companies to reduce greenhouse gases without fear of punishment later [emphasis added].
- Section 4–Authority for voluntary Action Agreements. This section provides the authority for entering into these agreements to the President and allows delegation to any federal department or agency [emphasis added].
- Section 5–Entitlement to Greenhouse Gas Reduction Credit for Voluntary Action. Provides authority for credits for: certain projects under the initiative for Joint Implementation program; prospective domestic actions (includes a significantly revised sequestration); and retrospective past actions [emphasis added].
Analyses
Robert R. Nordhaus and Stephen C. Fotis, Analysis of Early Action Crediting Proposals, Pew Center on Global Climate Change (October 1, 1998):
- For such an incentive to be effective, participants must know in advance the credits they will earn for particular GHG reductions or sequestration activities and be given clear assurances that they possess a legally enforceable right to receive earned credits. Existing law does not provide the legal framework to give participants that right. For that reason, the crediting mechanism should be clearly delineated by statute or in agreements authorized by statute [p. 2, emphasis added].
- Our review of existing statutory authorities indicates that the Executive Branch currently lacks authority to set up an early action crediting program. If such a program is to have binding effect, then it will have to be authorized by law [p. 18, emphasis added].
Testimony, Eileen Clausen, Executive Director, Pew Center on Global Climate Change (Senate Committee on Environment and Public Works, March 24, 1999):
- An analysis undertaken by the Pew Center and published in October 1998 finds that federal agencies do not have sufficient legal authority to provide the certainty that firms need to make significant early investments. Congress must provide the legislative framework to remove the disincentives to early action [pp. 3-4, emphasis added].
U.S. Energy Information Administration, Annual Report to Congress 1998 (April 1999, 1998DOE/EIA-1073):
- In October 1997, the White House announced that it favored “credit for early reductions,” shorthand for a not-yet-legislated program in which companies that reduced emissions prior to the 2008-2012 target date for the Kyoto Protocol would receive some to-be-defined “credit” for their actions. The announcement generated intellectual ferment as policymakers, companies, and advocates attempted to define the notions of “credit,” “early,” and “reductions” [p. 7, emphasis added].
Regulatory Comments
On February 14, 2002, President Bush directed the Department of Energy (DOE) to enhance the “accuracy, reliability, and verifiability” of the Voluntary Reporting of Greenhouse Gases Program (VRGGP), established pursuant to Section 1605(b) of the 1992 Energy Policy Act, and “to give transferable credits to companies that can show real emission reductions.” On May 6, 2002, DOE published a “Notice of inquiry and request for comment” on the President’s proposal in the Federal Register. Approximately 80 organizations and individuals submitted comments, which are available here and here.
- First, it is clear that section 1605(b) [of the Energy Policy Act] confers no authority on the administration to give credits against future global warming emissions limitations on companies that have made filings under that section. In fact, the 1992 EPACT legislation pointedly rejected proposals made at the time to confer credit status on reported reductions [p. 9].
- This [the President’s February 14, 2002 announcement calling on the Department of Energy to provide regulatory credit for certified voluntary greenhouse gas reductions] appears to be a request for legislative recommendations, because the administration has no authority under section 1605(b) or any other current law to ensure penalty protection or to give out transferable credits [p. 7, emphasis added].
Northeast States for Coordinated Air Use Management, Comment Letter of June 5, 2002:
- We are skeptical of the authority to use 1605(b) to guarantee any future emission credits and strongly suggest that such a claim not be made without new legislation [p. 1].
- 1605(b) was not designed for public recognition, baseline protection or the creation of early credits. Nor was it designed as the infrastructure for emissions trading . . . we are skeptical about how these [mandatory reporting and credit for early reductions] could be made legally binding without new legislation [Attachment, p. 1].
- However, though we support giving some form of credit to those participants that can show real reductions, including the transfer of reduction certificates, we are concerned about 1605(b) making promises about the future value of transferable reductions without first receiving authority from Congress. Under the current 1605(b) legislation, there is no congressional mandate that emission reductions will be recognized under future regulations [Attachment, p. 7].
Generators for Clean Air, Comment Letter of June 2002:
- Providing absolute assurances that companies will receive baseline protection and transferable credits may necessitate a federal statute authorizing DOE to enter into GHG mitigation agreements with participating companies or sectors. See U.S. v. Winstar Corp., 116 S.Ct. 2432 (1996) [p. 3].
Pew Center on Global Climate Change, Comment Letter of June 5, 2002:
- The Pew Center’s review of existing statutory authorities indicates that the Executive Branch currently lacks authority to assure that current efforts to reduce GHG emissions receive credit under a future law. If a baseline protection program is to have binding effect, it must be authorized by law [p. 12, emphasis added].
In a series of comment letters, I debated the Electric Power Industry Climate Initiative (EPICI) on the legality of early action crediting. The back and forth is posted below:
- Robert Gehri, EPICI, September 20, 2002
- Marlo Lewis, CEI, November 22, 2002
- Eric Holdsworth, EPICI, March 5, 2003
- Marlo Lewis, CEI, June 19, 2003
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