2008

On December 19, 2007, the U.S. Environmental Protection Agency (EPA) denied California a waiver, under the Clean Air Act, to set first-ever carbon dioxide (CO₂) emission standards for new motor vehicles. Today, the Senate Environment and Public Works Committee will hold a hearing on EPA’s denial of the California waiver. Chairman Barbara Boxer (D-CA) will no doubt pillory EPA Administrator Stephen Johnson as a betrayer of the Clean Air Act, the Planet, and the Children. Instead, she should thank him for averting an economically- and environmentally-debilitating regulatory morass. [link to press release]

If the EPA had granted the waiver, allowing California and other states to adopt CO₂ emission standards for new motor vehicles, CO₂ would become a pollutant “subject to regulation” under the Clean Air Act’s Prevention of Significant Deterioration (PSD) program. That, in turn, would compel EPA and its state-level counterparts to regulate CO₂ from hundreds of thousands of stationary sources, spawning a red-tape nightmare as detrimental to the environment as to the economy.

Attorneys Peter Glaser and John Cline provide an eye-popping analysis of the economic and administrative burdens that would be created by extending the PSD program to CO₂ in a November 8, 2007 testimony before the House Oversight and Government Reform Committee.

Under the PSD program, no new or existing “major” stationary source may be built or modified (if the modification increases emissions) unless the source first obtains a PSD permit. A source is defined as “major” if it is either in one of 28 listed industrial categories and emits at least 100 tons per year of an air pollutant, or is any other type of establishment and emits at least 250 tons per year. “This latter category is particularly troublesome,” warns the U.S. Chamber of Commerce and 18 other business associations in a December 12, 2007 letter to Congress, because hundreds of thousands of small-to-mid-size firms emit 250 tons of CO₂ per year.

Two hundred and fifty tons may sound like a lot of “pollution.” It is for traditional pollutants like sulfur dioxide and particulates. But 250 tons is a miniscule amount of CO₂—roughly the quantity emitted each year by two dozen average homes.

“Major” CO₂ sources would include “most large buildings heated by furnaces using fossil fuels (office and apartment buildings, even some very large homes), or buildings of any size using natural gas as a cooking source in a commercial kitchen (such as restaurants, hotels, for-profit hospitals and nursing homes, malls, sports arenas), or businesses that generate or use CO₂ naturally as a component of its operations (soda manufacturers, bakers, breweries, wineries),” notes the Chamber letter. All such establishments “may exceed the 250-ton-per year threshold for CO₂ emissions.

The PSD permitting process is costly and time-consuming. As the Chamber letter observes, “It is not uncommon for PSD permits for major sources to cost hundreds of thousands or even millions of dollars and take years to complete.” Glaser and Cline caution that, “No small business requiring a moderate-sized building or facility heated with fossil fuel could operate subject to the PSD permit administrative burden.”

To obtain a PSD permit, a regulated entity must install “best available control technology” (BACT). Nobody knows yet what BACT for CO₂ entails. States enforce BACT through case-by-case determinations based on their Clean Air Act State Implementation Plans (SIPs). It could be years before states adopt and EPA approves SIPs with new BACT requirements for CO₂. In the meantime, every major source would operate in regulatory limbo, creating what Glaser and Cline describe as “considerable, and perhaps fatal, uncertainty for businesses.” Indeed, “since BACT determinations for CO₂ have no regulatory history at this time, and can vary by type of facility and from state-to-state, businesses wishing to construct new sources or modify existing ones would have no basis for planning what the regulatory requirements will be.”

The real “California Adventure”—also known as PSD Hell—begins once states start making BACT determinations for CO₂. The flood of permit applications from potentially hundreds of thousands of “major” stationary sources would overwhelm the state agencies that administer the PSD program. As already noted, determining whether a major source complies with BACT and merits a PSD permit is done on a case-by-case basis and can take years to carry out. Regulating CO₂ under PSD would likely not only shut down most construction activity in the United States, it would also cripple the state agencies that enforce the Clean Air Act.

In a December 17, 2007 letter to President Bush, the Competitive Enterprise Institute and 20 other free-market advocates pointed out the obvious fact that the Clean Air Act’s motor vehicle provisions are not a mandate to debilitate either the economy or environmental enforcement.

Congress did not intend for provisions dealing solely with emissions from new motor vehicles to suppress construction activity throughout the land. Nor did Congress intend for the California waiver provision to squander state agency resources on inconsequential CO₂ emission reductions to the detriment of high-priority, statutorily-prescribed Clean Air Act responsibilities.

Chairman Boxer should applaud, not condemn, EPA for following the real will of Congress and protecting both the economy and environment of California and the nation.