Marlo Lewis

Revised 10/28/09

At the first Senate Environment and Public Works Committee hearing on S. 1733, the Kerry-Boxer “Clean Energy Jobs and American Power Act,” Department of Energy Secretary Steven Chu explained the economic rationale for adopting a Kyoto-style cap-and-trade program.

His argument, in a nutshell, goes like this:

1. Reducing emissions globally will require a massive investment in “clean technologies” — an estimated $2.1 trillion in wind turbines and $1.5 trillion in solar voltaic panels by 2030. These investments will create many green jobs.
2. “The only question is — which countries will invent, manufacture, and export these clean technologies and which will become dependent on foreign products.”
3. The United States is falling behind. “The world’s largest turbine manufacturing company is headquartered in Denmark. 99 percent of the batteries that power America’s hybrid cars are made in Japan. We manufactured more than 40 percent of the world’s solar cells as recently as the mid-1990s; today we produce just 7 percent.”
4. To seize the opportunity of clean tech and keep from falling farther behind, “we must enact comprehensive climate legislation,” the most important element of which is a “cap on carbon emissions that ratchets down over time. That critical step will drive investment decisions towards clean energy.”

There is so much silliness packed into Chu’s testimony that it’s hard to know where to begin.

Let’s start with Step 1: The world will need $3.6 trillion worth of clean tech by 2030. Suppose the world does decide to reduce emissions. There’s no good reason to suppose that wind turbines and solar panels will ever contribute more than a small fraction of the “solution,” because these technologies are not economically “sustainable” — they consume more wealth than they produce.

A recent report by the Rheinisch-Westfälisches Institut (RWI) finds that Germany’s Renewable Energy Sources Act (EEG) has utterly failed to make wind and solar power either commercially viable or cost-effective as an emission-reduction strategy. Herewith a few highlights.

First, renewable power is a net drain on Germany’s economy:

• Germany subsidizes solar photovoltaics (PVs) at a rate of 59¢ per kWh. That is “more than eight times higher than the wholesale electricity price at the power exchange and more than four times the feed-in tariff [subsidy] paid for electricity produced by on-shore wind turbines.”
• “Even on-shore wind, widely regarded as a mature technology, requires feed-in tariffs [subsidies] that exceed the per-kWh cost of conventional electricity by up to 300% to remain competitive.”
• Germany has the second-largest installed wind capacity in the world, “behind the United States,” and the largest installed PV capacity in the world. However, installed capacity is not the same as production or contribution, and “by 2008 the estimated share of wind power in Germany’s electricity production was 6.3% . . . The amount produced by solar photovoltaics was a negligible 0.6% despite being the most subsidized renewable energy, with a net cost of about 8.4 Bn € (US 12.4 Bn) for 2008.”
• “The total net cost of subsidizing electricity production by PV modules is estimated to reach 53.3 Bn € (US $73.2 Bn) for those modules installed between 2000 and 2010. . . .wind power subsidies may total 20.5 Bn € (US $28.1 Bn) for wind converters installed between 2000 and 2020.”

Even as a carbon-reduction strategy, wind and solar power are uneconomic:

• “Given the net cost of 41.82 Cents/kWh for PV modules installed in 2008, and assuming that PV displaces conventional electricity generated from a mixture of gas and hard coal, abatement costs are as high as 716 € (US $1,050) per tonne [of carbon dioxide].”
• “Using the same assumptions and a net cost for wind of 3.10 Cents/kWh, the abatement cost is approximately 54 € (US $80) [per tonne CO2]. While cheaper than PV, this cost is still nearly double the ceiling of the cost of a per-ton permit under Europe’s cap-and-trade scheme.”
• Carbon permits are trading at 13.4 € per ton. “Hence, the cost from emission reductions as determined by the market is about 53 times cheaper than employing PV and 4 times cheaper than using wind power.”
• Germany’s “increased use of renewable energy technologies generally attains no additional emission reductions beyond those achieved by ETS [European Trading System] alone. In fact, since establishment of the ETS in 2005, the EEG’s net climate effect has been equal to zero.”

Although the EEG creates some “green jobs,” the net impact on wealth and jobs is negative:

• “While employment projections in the renewable sector convey seemingly impressive prospects for gross job growth, they typically obscure the broader implications for economic welfare by omitting any accounting of off-setting impacts. These impacts include, but are not limited to, job losses from crowding out of cheaper forms of conventional energy generation, indirect impacts on upstream industries, additional job losses from the drain on economic activity precipitated by higher electricity prices, and consumers’ overall loss of purchasing power due to higher electricity prices, and diverting funds from other, possibly more beneficial investment.”
• “Proponents of renewable energies often regard the requirement for more workers to produce a given amount of energy as a benefit, failing to recognize that it lowers the output potential of the economy and is hence counterproductive to net job creation.”

As my colleague Don Hertzmark observes: “If you must continually pour external resources into an energy source, then it cannot be a net source of jobs in the economy, since those resources could have gone somewhere else to create real work.”

So, yes, via mandates and subsidies, governments around the world could pump $2.1 trillion into wind turbines and $1.5 trillion into PVs. But this is an unsustainable market that will make the world poorer, not wealthier, as Chu imagines.

Okay, now for Step 2: We must choose either to make clean tech or become dependent on foreign producers. This point is silly on many levels.

• If we don’t enact cap-and-trade, then we won’t even have to consider buying or making trillions of dollars worth of “clean tech.”
• Even if we choose to limit emissions, the German experience indicates that investing billions (let alone trillions) in clean tech is not cost-effective.
• Even if we do enact a cap-and-trade program, and even if clean tech becomes cost-effective, why would we want to make our own wind turbines and PVs if imported products are cheaper?
• Chu worries the United States could become “dependent on foreign products” — as if Denmark or Japan might refuse to sell us wind turbines or hybrid cars. Even oil is not the “energy weapon” it is sometimes cracked up to be, as Jerry Taylor and Peter Van Doren of the Cato Institute explain.
• Besides, Toyota makes lots of cars — including hybrids — in the United States. Similarly, although Vestas, the world’s largest wind turbine manufacturer, is, as Chu says, ”headquartered” in Denmark, it is investing $1 billion in four Colorado plants. Chu’s fear of “dependence on foreign products” makes no sense in a globalized economy.

Step 3: The United States is falling behind in clean tech manufacture. If we’re “falling behind,” then why do Toyota and Vestas build factories here? Besides, “falling behind” is a problem only if the clean-tech industy is a net wealth-creator. As we have seen, this is not the case for wind turbines and PVs, which is why they require market-rigging subsidies, mandates, and penalties (caps or carbon taxes) levied against carbon-based energy.

If clean tech ever does become sustainable, the only legitimate role for policymakers would be to eliminate political impediments to market-driven investment. As MIT’s Thomas Lee, Ben Ball, Jr., and Richard Tabors wrote in the conclusion of Energy Aftermath, a retrospective on Carter-era energy policies:

The experience of the 1970s and 1980s taught us that if a technology is commercially viable, then government support is not needed and if a technology is not commercially viable, no amount of government support will make it so.

Step 4: To be leaders in clean tech manufacture, we must put a price on carbon — a cap that ratchets down every year.

This is convoluted. Chu began by arguing that we needed to invest in clean tech in order to reduce emissions. Now, he says we must reduce emissions to spur investment in clean tech! Apparently, if you can’t sell cap-and-trade on the basis of climate alarm, claim that it’s “about jobs.”

Another confusion — Chu suggests U.S. firms can’t or won’t develop clean-tech products for sale in the global marketplace unless the federal government boosts domestic market share by putting a price on carbon. Two problems here. First, a price on carbon does relatively little to increase the market share of wind and solar power, because even with a price on carbon to handicap fossil energy, renewable power is still uncompetitive. That’s why the Waxman-Markey bill includes a renewable portfolio standard in addition to a cap-and-trade program.

Second, a booming domestic market for a product is not a prerequisite to success in exporting that product. In the 1980s, the Asian Tigers produced enormous quantities of exports that were not widely purchased, and in some cases not even offered for sale, in domestic markets. If clean-tech products yield high returns in the global marketplace, enterprising U.S. firms will get into the game even if the products do not have a big market in the United States.

The irony is that a cap-and-trade program could actually be counter-productive to the development of an export-oriented clean-tech sector. Low-cost energy is a source of competitive advantage. By increasing energy costs, cap-and-trade would make all U.S.-based manufacture less competitive, including companies specializing in clean-tech products.

Today, on MasterResource.Org, the free-market energy blog, I examine the Kerry-Boxer bill’s not-so-hidden fangs.

Like its House companion bill, Waxman-Markey, Title VII, Part A of Kerry-Boxer contains language that will:

1. encourage CO2 tort litigation against businesses smaller than those subject to the cap-and-trade program, and
2. pressure policymakers to “move the goal posts” (amend the legislation to tighten the caps).

 Bottom Line: The costs of climate legislation may greatly exceed the most pessimistic estimates of recent modeling studies. Those looking for “regulatory certainty” in these bills haven’t read the fine print.

Senators Kit Bond (R-MO) and Kay Bailey Hutchison (R-TX) have just released a report, Climate Change Legislation: A $3.6 Trillion Gas Tax, which estimates how much additional pain at the pump the Waxman-Markey would inflict on U.S. consumers.

The Waxman-Markey bill (like its Senate companion, Kerry-Boxer) aims to cap U.S. carbon dioxide (CO2) emissions from 2012 to 2050. Bond and Hutchison estimate the bill’s impacts on motor fuel prices during 2015 to 2050. Of course, their study depends on assumptions regarding population growth, GDP growth, and technology change out to 2050. But in that regard, the Bond-Hutchison report is no different from any other study of Waxman-Markey, including studies touted by the bill’s supporters.

A virtue of this report is its straightforward, uncomplicated methodology. Anyone who can do arithmetic can understand how Bond and Hutchison arrive at their conclusions.

Here’s how Bond and Hutchison proceeded:

• For estimates of how Waxman-Markey would affect motor fuel prices, they relied on a study prepared by Charles River Associates for the National Black Chamber of Commerce (NBCC). The NBCC study estimates, for example, that Waxman-Markey would increase the average price per gallon of motor fuels by 24¢ in 2020, 38¢ in 2030, 59¢ in 2040, and 95¢ in 2050.
• Bond and Hutchison also use the NBCC study’s estimate of how much fuel Americans would consume annually from 2015 through 2050.
• Then, for each year during this period, they multiplied the number of gallons consumed times the price increase per gallon.
• Bond and Hutchison note that the NBCC study’s fuel-price estimates take into account the relevant Waxman-Markey cost-containment provision, under which refiners get 2.25% of all emission allowances free-of-charge during 2014 to 2026.
• Finally, Bond and Hutchison added up the increased annual fuel costs from 2015 through 2050.

Here are some of the results:

• In 2020, Waxman-Markey will impose $43.6 billion in additional fuel costs on the American people. This will rise to $78.1 billion in 2030, $128.2 billion in 2040, and $215.8 billion in 2050.
• Cumulatively, Waxman-Markey will impose $3.6 trillion dollars in additional total fuel costs on the United States.
• In 2020, Waxman-Markey will increase each gallon of gasoline purchased by 24¢. With Americans expected to consume 122 bilion gallons of gasoline in that year, Waxman-Markey will impose $27.5 billion in additional gasoline costs.
• In 2030, with Waxman-Markey forcing gasoline 38¢ higher per gallon, Americans will pay $42.3 billion more for gasoline.
• Waxman-Markey will force the price of each of the 83 billion gallons of diesel fuel consumed by Americans in 2020 higher by 17¢ and $12.9 billion in total. By 2030, Waxman-Markey will force diesel 28¢ higher per gallon, totaling $28.3 billion.
• In 2020, Waxman-Markey will make jet fuel 11¢ more expensive per gallon. Americans will consume 34 billion gallons of jet fuel in their air travel, imposing $3.2 billion in additinal jet fuel costs. This figure rises to an additional $7 billion in 2030.
• In 2020, each farmer in the Northeast on average will pay $630 in additional fuel costs. Farmers in the South will pay an additional $966 on average, and farmers in the Midwest an additional $1,213 on average.
• In 2020, the average  owner of a diesel-powered tractor-trailor will pay an additional $1,728 for fuel.

To wrap up, Bond and Hutchison make a significant contribution to the debate by clarifying the consumer impacts of cap-and-trade legislation.

“Climate change is a threat multiplier” is the new trendy rationale for Kyoto-style energy rationing. One hears little these days about Al Gore’s nightmare vision of death and destruction from ever more powerful and frequent hurricanes, catastrophic sea-level rise, or a warming-induced climate shift into a new ice age. This story line is too implausible for most grownups to swallow or patronize, no matter how desperate they are to look green.

The new, more ‘nuanced’ rationale for energy rationing is that global warming will aggravate several pre-existing environmental and health threats that cause or contribute to instability and conflict. We’re supposed to fear that a warming world will be much more violent and dangerous. Supposedly, “even the generals are worried” that U.S. security forces will be overstretched, even overwhelmed, by crisis after crisis after crisis. Unless, of course, Congress comes through with bigger and bigger appropriations for DOD! 

This is bunkum, as I discuss here, here, and here. Today, I want to pour more cold water on threat-multiplier hype, courtesy of my colleague, environmental researcher Indur Goklany.

Goklany (”Goks” to his friends) recently responded to an article in the Economist arguing that global warming exacerbates conditions (drought, flooding, hunger, insect-borne disease) in poor countries that already impede their development. From which it follows (although the article doesn’t spell it out) that climate change increases the likelihood of state failure, violence, and war.

Chief among the conditions that will allegedly become worse in a warming world are drought and flooding. ”Regardless of whether this is the case,”  Goks writes in his letter to the Economist, “deaths from droughts have declined 99.9% since the 1920s, and 99% from floods since the 1930s” [1]. Yet alarmists tell us that the warming of the latter half of the 20th century was unprecedented in the past 1300 years.

In view of the long-established and overwhelming trends towards greater safety, despite allegedly unprecedented warming, it is difficult to believe that droughts and floods will be a major cause of violent conflict in coming decades. That is especially the case when, as noted previously, nations faced with water shortages typically cooperate and trade, not come to blows.

More broadly, Goks points out, all the long-term trends in environmental factors affecting development are positive:

In fact, access to safe water, improved sanitation, crop yields, and life expectancy has never been higher in the history of mankind.[2] This is true for both the developing and developed worlds. Much of this has been enabled, directly or indirectly, by economic surpluses generated by the use of fossil fuels and other greenhouse gas generating activities such as fertilizer usage, pumping water for irrigation, and use of farm machinery. And crop yields, in particular, are also higher today than ever partly because of higher concentrations of CO2, without which yields would be zero.

Some day — who knows when?– “even the generals” will outgrow climate hysteria and get back to worrying about threats they actually know how to do something about.

My weekend is starting out fine, thanks to this happy news.

Peter Glaser, an environmental attorney with Troutman Sanders, just sent around his analysis. Here it is:

California Federal Court Dismisses Global Warming Common Law Nuisance Lawsuit

In another chapter in the continuing saga of whether energy companies can be sued under tort law for emitting greenhouse gases (GHGs), a federal district court in California yesterday dismissed a lawsuit brought by the Kivalina Alaska Native Village and others against a large number of energy companies.  The Court became the fourth federal district court to find, in essence, that there is no common law nuisance tort of global warming.  One of those district court decisions, however, was recently reversed by the United States Court of Appeals for the Second Circuit in the Connecticut v. AEP case, which we reported on extensively in a previous client alert available at the link provided below. 

The lawsuit dismissed yesterday alleged that the defendants’ GHG emissions contribute to global warming that has diminished the Artic sea ice that protects the Kivalina coastline.  As a result, the plaintiffs argued that their protection from winter storms has diminished, resulting in erosion and destruction of the land which will require that Kivalina’s residents be relocated.  Plaintiffs sought monetary damages for these impacts, which they estimated in a range of $95-400 million.

The United States District Court for the Northern District of California dismissed the lawsuit on the ground that the case involved a political question more properly decided by the legislative and executive branches.  The court also concluded that the plaintiffs lacked standing.  On the political question issue, the Court ruled that:

Regardless of the relief sought, the resolution of Plaintiff’s nuisance claim requires balancing the social utility of Defendants’ conduct with the harm it inflicts.  That process, by definition, entails a determination of what would have been an acceptable limit on the level of greenhouse gases emitted by Defendants….the allocation of fault – and cost of global warming is a matter appropriately left for determination by the executive and legislative branch in the first instance.

On standing, the court ruled that “[i]n view of the undifferentiated nature of greenhouse gas emissions from all global sources and their worldwide accumulation over long periods of time, the pleadings make clear that there is no realistic possibility of tracing any particular alleged effect of global warming to any particular emissions by any specific person, entity, group at any particular point in time.”

The decision will undoubtedly be appealed to the United States Court of Appeals for the Ninth Circuit, a court known for its liberal outlook.  At the same time, one of the other lawsuits, involving allegations that energy companies’ emissions contributed to Hurricane Katrina, is now pending and awaiting decision in the United States Court of Appeals for the Fifth Circuit.  Defendants in the Second Circuit Connecticut v. AEP case are currently considering whether to seek rehearing.  Ultimately, this issue may end up in the Supreme Court.

See our discussion of the Second Circuit Connecticut v. AEP case and the issues these global warming tort lawsuits raise.

* * *

P.S., I also blogged on the Second Circuit case here.

Updated 10/16/09

Today [Oct. 15, 2009], Rep. Darrell Isa (R-CA), ranking member of the House Committee on Oversight and Government Reform, and Rep. James Sensenbrenner, ranking member of the House Select Committee on Energy Independence and Global Warming, released a joint minority staff report titled, The Politics of EPA’s Endangerment Finding.

I’ll say more about the report after reading the 146-page document. Key findings include:

• EPA prejudged the outcome of its endangerment finding to advance the Obama administration’s policy agenda.
• EPA’s effort to control greenhouse gas emissions will give the Agency authority over the entire U.S. economy. 
• EPA did not conduct its own analysis. Instead, the Agency deferred to the judgment of two external literature surveys — the IPCC reports and the U.S. National Assessment of Climate Change. 
• EPA erected internal barriers to stifle dissent within the Agency.
• EPA apparently refused to read the thousands of comments submitted in response to the previous administration’s Advance Notice of Proposed Rulemaking.
• EPA punished and demoted whistleblower/skeptic Alan Carlin and retaliated against the office in which he works.
• Energy and Environment Czar Carol Browner may have violated the Presidential Records Act during fuel-economy negotiations between EPA, the Department of Energy, the State of California, and the auto industry.

These points seem spot on to me. The report, however, contains details I have not seen elsewhere. As aforesaid, I’ll blog about this later.

Update

Having read the Issa-Sensenbrenner report, I’d like to share a few details.

Non-responsiveness to congressional inquiries

• In a letter of March 12, 2009, Rep. Issa asked EPA Administrator Lisa Jackson for various information relating to public comment on the Agency’s Advanced Notice of Proposed Rulemaking (ANPR), such as how many comments EPA received, how many of those were in favor of an endangerment finding, how did the Agency determine which comments were “key” and required a response. Ms. Jackson’s letter of May 18 was completely non-reponsive to these queries. Issa and Sensenbrenner justifiably conclude that EPA may not have read most of the comments on the ANPR. 
• Jackson’s May 18 letter was also non-responsive to Mr. Issa’s question as to whether EPA had ever before found a pollutant to “endanger human health” solely on the basis of indirect effects on weather and climate, and to his request for a list of precedents on which EPA relied to classify CO2 emissions as a health hazard due to their supposed indirect effects.
• All her letter says on this matter is: “EPA’s notice of the proposed endangerment finding identifies the precedents the agency relied on its making the proposal.” If so, then why not quote the relevant passage, or cite the pertinent pages? The public health discussion (pp. 18901-18902) in EPA’s endangerment proposal discusses no precedents and lists no previous examples of pollutants deemed health hazards by virtue of their indirect effects.

Bad-mouthing SBA

• On April 24, 2009, EPA posted an OMB-coordinated inter-agency review of its proposed endangerment finding. The review warned of “serious economic consequences” for small business, noted that EPA had not “undertaken a systematic risk analysis or cost-benefit analysis,” and said that EPA seemed to “stretch the precautionary principle” in making the case for endangerment.
• Obama officials dismissed these criticisms as irrelevant, claiming the author was “a Bush holdover.” In fact, the so-called holdover was a career civil servant originally hired by the Small Business Administration during the Clinton Administration. Her previous job was as an aid to a Democratic Member of Congress.
• OMB also disclosed the name of the “Bush holdover,” violating its own protocol designed to protect professional staff from political retaliation. OMB claimed it divulged the analyst’s identity to “correct inaccurate and misleading media reports.” However, the reports simply quoted the OMB document. OMB never clarified what “inaccuracies” its breach of protocol corrected.

Mistreatment of Dr. Alan Carlin

• Dr. Carlin, a 37-year EPA analyst, wrote a comment critical of the science on which EPA proposed to base its endangerment finding. Al McGartland, director of EPA’s National Center for Environmental Economics (NCEE), the office in which Carlin works, refused to transmit Carlin’s comment to EPA’s Office of Air and Radiation, told Carlin not to discuss the endangerment proceeding with anyone outside of NCEE, ordered Carlin to discontinue all work on climate change, removed him from NCEE’s Climate Workgroup, and cut him from the group’s email list.
• In addition, McGartland reassigned Carlin to tasks (updating a grants database and an economic incentives report) previously performed by a junior staffer and an outside contractor.
• McGartland’s behavior appears to have been motivated by fear of reprisal from Agency higher-ups. His email to Carlin of March 17 states: “The Administrator and the administration has [sic] decided to move forward on endangerment, and your comments do not help the legal or policy case for this decision . . . I can only see one impact of your comments given where we are in the process, and that would be a very negative impact on our office.”

EPA efforts to discredit Dr. Carlin

• To discredit Carlin’s comment, EPA initially stated that Carlin was “not a scientist” and “not part of the working group dealing with the issue.”
• However, Carlin holds a degree in physics from the California Institute of Technology, was a member of NCEE’s Climate Workgroup, and is listed as an author of the original (2007) endangerment finding Technical Support Document (TSD).
• In response to a July 17 letter from Rep. Joe Barton (R-TX), EPA confirmed that “Dr. Carlin was one of several members of the NCEE workgroup that reviewed the [2009] draft TSD for EPA’s proposed endangerment finding for greenhouse gases.”

On July 8, 2009, EPA finally included Dr. Carlin’s comment in its endangerment docket — almost one month after the comment period closed. Alan Carlin still has a job — although he no longer works on climate issues. NCEE has not been defunded, despite concerns expressed by Carlin’s colleague John Davidson (and hinted at in McGartland’s March 17 email) that Agency brass could punish NCEE for committing climate heresy.

Public outcry over the treatment of Alan Carlin and the ongoing investigations by Reps. Issa, Sensenbrenner, and Barton have not produced an atmosphere of open and free intellectual discourse at EPA. Nonetheless, the outcry and the investigations can only help deter future acts of retaliation against climate skeptics.

For further discussion of these issues, see my blog post, John Broder’s spin job on Alan Carlin.

Updated 10/16/09

Over the weekend, Sens. John Kerry (D-MA) and Lindsey Graham (R-SC) co-authored an oped in the New York Times titled, “Yes We Can (Pass Climate Change Legislation).”

On Tuesday, my colleague Myron Ebell responded with “Yes We Can (Raise Your Energy Prices and Send Jobs Abroad).”

On Wednesday, the Washington Examiner  scorned “Lindsay Graham’s costly collegiality.”

Thursday, on MasterResource.Org, the free-market energy blog, I posted “Sen. Lindsey Graham’s Me-Too Kyotoism (will he snatch defeat from the jaws of victory?)”

In the Washington Examiner, Mark Tapscott concludes that “Lindsey Graham is the Senate’s densest Republican.”

Timothy H. Lee of the Center for Individual Freedom says Lindsay Graham Desperately Tries to Become Cool with Global Warming.

Last week I posted several excerpts from EPA’s “Tailoring Rule,” which confirm that the Supreme Court, in Massachusetts v. EPA (April 2007), set the stage for an economically ruinous administrative quagmire.

To reiterate:

• EPA, in response to Mass v. EPA, proposes to establish greenhouse gas (GHG) emission standards for new motor vehicles.
• Once those standards are adopted, carbon dioxide (CO2) automatically becomes a “pollutant subject to regulation” under the Clean Air Act’s Prevention of Significant Deterioration (PSD) pre-construction permitting program and Title V operating permits program.
• A firm must obtain a PSD permit in order to build or modify a “major emitting facility” defined as a source with a potential to emit 100 tons per year (tpy) of a regulated pollutant (if the facility is in one of 28 listed industrial categories) or 250 tpy (if the facility is any other type of establishment).
• A firm must obtain a Title V permit in order to operate a “major emitting facility” defined as a source with the potential to emit 100 tpy of a regulated pollutant.
• An estimated 1.2 million buildings and facilities — big box stores, office buildings, enclosed malls, even commercial kitchens — actually emit 250 tpy of CO2. Millions more have a potential to emit 100 tpy of CO2.
• EPA and state environmental agencies currently process approximately 280 PSD permits and 14,700 Title V permits annually.
• EPA estimates that permitting agencies would have to process 41,000 PSD permits and 6.1 million Title V permits annually for CO2 sources meeting the statutory definitions of “major emitting facility.”
• The enormous volume of permit applications would “immediately and completely overwhelm” EPA and its state counterparts, bringing the permitting process — and much economic activity along with it — to a screeching halt. 

In the Tailoring Rule, EPA proposes to suspend, over a six-year period, the PSD and Title V requirements for GHG sources emitting less than 25,000 tpy, on a CO2-equivalent basis. During the next five-years EPA will develop “streamlining” options enabling smaller and smaller sources to comply without going broke (we hope — currently the average PSD permit costs $125,120 and 866 burden-hours for a source to obtain). Oh yes, let me guess, EPA will also lobby Congress for exponential increases in staff and other “administrative resources.”

Although EPA does not put it this way, the Agency is proposing to amend the Clean Air Act. EPA invokes the judicial doctrines of  ”absurd results” and “administrative necessity” to justify this assertion (usurpation?) of legislative power.

In a later post, I may analyze the cases EPA cites to defend its proposal to flout clear and unambiguous statutory language. In today’s post, I simply want to excerpt passages from the Tailoring Rule showing how regulation of CO2 under the Clean Air Act as written, rather than as re-imagined, leads to absurd results — that is, produces insoluble conflicts between provisions of the Clean Air Act and generates outcomes contrary to congressional intent.

The gist of these excerpts is as follows. When Congress enacted the PSD and Title V provisions, it did not intend to create a paralyzing administrative quagmire. That, however, is what we’ll get if permitting agencies apply the PSD and Title V provisions as written to CO2. Sources that Congress never wanted EPA to regulate would be regulated, while others that Congress did want EPA to regulate would not be, due to the immense backlogs. The administrative morass would also create an enormous roadblock to economic development. Yet Congress wanted the Clean Air Act to enhance the nation’s productivity.

PSD

• CAA section 165(c) is particularly important in this regard. It requires that the permitting authority grant or deny “[a]ny completed permit application for a major emitting facility . . . not later than one year after the date of filing of such application.” A literal interpretation of CAA sections 165(a)(1) and 169(1) to apply at the 100/250 tpy levels would render compliance with this provision impossible by requiring far more permit applications than permitting authorities could process under the 12-month deadline … [p. 88]
• A literal interpretation of CAA sections 165(a)(1) and 169(1) to apply at the 100/250 tpy level would also be directly inconsistent with the PSD-purpose in CAA section 160, in particular, section 160(3), which is “to insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources” . . . Because PSD is a preconstruction requirement, increasing permitting authorities’ workload from 300 to 41,000 permits would severely undermine this purpose of facilitating economic growth . . . Each year, many thousands of sources would face multi-year delays in receiving their permits, and as a result, for all practical purposes, they would be forced to place on hold their plans to construct or modify. [p. 89]
• . . . a literal application of the applicability provisions would lead to results that are diametrically inconsistent with Congress’s expressed intent . . . Congress was focused on sources of criteria pollutants — primarily sulfur dioxide (SO2), particulate matter, nitrogen oxides (NOx), and carbon monoxide (CO) — and not GHG emissions. This focus stems from the basic purpose of the PSD program, which is to safeguard maintenance of the NAAQS [national ambient air quality standards], combined with the limited awareness at the time of the problem of climate change. [p. 90]
• Congress designed the PSD provisions to impose significant regulatory requirements, on a source-by-source basis, to identify and implement BACT [best available control technologies] . . . Congress was well aware that because these requirements are individualized to the source, they are expensive. Accordingly, Congress designed the applicability provisions to apply these requirements to industrial sources of a certain type and size . . . Congress’s limitation of PSD to larger sources was quite deliberate, and was based on its determination to limit the costs that PSD permitting entails to larger sources in certain industries . . . ”facilities, which due to their size, are financially able to bear the substantial regulatory costs imposed by the PSD provisions and which, as a group, are primarily responsible for emissions of the deleterious pollutants that befoul the nation’s air” [quoting Alabama Power v. Costle; pp. 90-91]
• However, applying the 100/250 tpy threshold literally to CO2 emissions would frustrate congressional intent by subjecting to PSD sources that Congress specifically intended not to include. [p. 95]
• . . . the extraordinary number of sources subject to PSD would preclude the permitting authorities from processing permit applications for all sources, including those Congress intended to subject to PSD. Because PSD is a preconstruction program, those sources would face many years of delay before they could construct or modify, which would undermine congressional [intent] to allow economic growth in PSD areas. [p. 100]

Title V

• . . .a literal application of the 100 tpy threshold requirement in CAA sections 502(a), 501(2)(B), and 302(j) would be in tensions with a specific CAA requirement, that of CAA section 503(c), which imposes a time limit of 18 months from the date of receipt of the completed permit application for the permitting authority to issue or deny the permit. It would be flatly impossible for permitting authorities to meet this statutory requirement if their workload increases from 14,000 permits to 6.1 million. [p. 101]
• As noted elsewhere, Congress intended through Title V to facilitate compliance [with other Clean Air Act requirements] by establishing an operating permit program that requires the source to combine in a single permit all of its CAA requirements. [p. 101] [However] . . . the great majority of these [6.1 million] sources will not be subject to any CAA requirements, so that although they would need to apply for and receive a permit, there would be no applicable requirements to include in the permit and the exercise would not improve compliance. [p. 103]
• Thus, as with PSD, a literal interpretation of the Title V threshold provisions would apply Title V to millions of sources that Congress did not intend be covered, and the ensuing administrative burdens — at least initially — would impede the issuance of permits to the thousands of sources that Congress did intend be covered. [p. 104]

What would be funny about all of this, if the threat to our economic and constitutional system of separation of powers did not loom so large, is the spectacle of EPA carefully tip-toeing around the real source of the absurd results: Mass. v. EPA.

It’s not only the case that Congress did not intend to apply PSD and Title V to small entities. Congress never intended for EPA to control CO2 emissions under the Clean Air Act!

The one limited exception (which occurred after Mass v. EPA was decided) is the renewable fuel standard (RFS) established by the 2007 Energy Independence and Security Act (EISA). The RFS mandates the sale of renewable fuels, which must achieve specified percentage reductions in GHG emissions, based on a life-cycle analysis, compared to petroleum-based fuels. However, section 210(b)(12) of EISA makes clear that the RFS does not establish precedent for any additional regulation of CO2 under any other provision of the Clean Air Act:

Nothing in this subsection, or regulations issued pursuant to this subsection, shall affect or be construed to affect the regulatory status of carbon dioxide or any other greenhouse gas, for purposes of other provisions (including section 165 [i.e., the PSD program] of this Act [i.e., the Clean Air Act].  

Conclusion

EPA writes as if Congress, when it enacted or amended the Clean Air Act, somehow inserted malicious code — the regulatory equivalent of a computer virus — into the text of the statute. This self-destruct program, we are to suppose, was lurking in there all this time. Then all of a sudden, the dormant bug became active, and now the Clean Air Act is going haywire, working at cross purposes with itself, subverting congressional intent, and imperiling the nation’s economic future. Therefore, EPA must step in, play lawmaker, and amend the Act.

And if you believe any of that, dear reader, I’ve got a bridge to sell you!

As I said in my earlier post, when a court decision leads to absurd results, there are only two possibilities. Either (1) the absurdity was embedded in the statute from the beginning, and the court just brought it to light. Or (2) the court manufactured the absurdity by mis-reading of the statute.

The absurdities EPA’s Tailoring Rule describes exists only by virtue of the Massachusetts Court’s agenda-driven decision. The real issue in Mass. v. EPA, which the Court never addressed, was whether Congress, when it enacted and amended the provision in dispute — section 202 of the Clean Air Act — in 1970 and 1977, intended for EPA to apply the Act as a whole, including PSD and Title V and the NAAQS program, to carbon dioxide for global warming purposes. To ask this question is to answer it.

Moreover, as I explain in my comment (pp. 28-23) on EPA’s endangerment proposal, the Court’s entire argument rests on a tortured reading of the Clean Air Act definition of ”air pollutant,” in section 302(g).

Here’s the semantic game the Court majority employed to empower EPA to Kyotoize the U.S. economy: (i) The EPA has authority to regulate air pollutants; (ii) an “air pollutant” is anything “emitted” into or otherwise entering the air; (iii) carbon dioxide is emitted; ergo (iv), EPA has authority to implement regulatory climate policy.

The lynchpin of the argument is step (ii). Justice Scalia quipped that under the majority’s reading of 302(g), anything airborne, “from Frisbees to flatulence,” qualifies as an air pollutant. It’s actually worse than that. On the majority’s reading, even totally clean air, air that is 100% pollution-free, is an “air pollutant” if it is “emitted” into or otherwise enters the ambient air. That is absurd. From absurd premises come absurd results.