Economic Implications of Greenhouse Gases Under the Clean Air Act

While there have been a large number of analyses of the potential ramifications of regulation of greenhouse gas emissions under the U.S. Clean Air Act (CAA), very few have assessed the potential economic impacts. A recent piece in the journal Review of Environmental Economics & Policy does just this, and also compares economic impacts vis-a-vis legislative alternatives.  The article also discusses options to increase compliance flexibility, thereby potentially maximizing emissions reductions. This would be a an excellent student reading.

Among the article’s take-aways:

  1. New CAA regulations that took effect in 2011 will reduce light vehicle emissions by 21 percent by 2030, “making them among the most stringent standards in the world.” Moreover, even more stringent regulations that are being developed, and would take effect;
  2. Once a pollutant is made subject to CAA jurisdiction in any context, it extends to stationary sources, which means that greenhouse gases from such sources are now subject to New Source Review, which, inter alia, mandates Best Available Control Technology for new or substantially modified existing facilities;
  3. The third tool in the CAA’s belt, regulatory standards, covering stationary sources, will have the greatest impact on greenhouse gas emissions. This includes the potential to treat GHGs as a hazardous pollutant under CAA §112, regulation of greenhouse gases by establishing National Ambient Air Quality Standards (NAAQs) under CAA §108–110, regulation of U.S. emissions based on their international impact, or performance standards under ;
  4. The use of performance standards is the most “effective and practical approach” to address greenhouse gas emissions under the CAA
    • Benefits of this approach, which includes New Source Performance Standards, include the ability to build on existing standards, a relatively quick regulatory process, and consideration of cost in setting standards, unlike under NAAQS;
    • Potential disadvantages of performance standards include the threat that courts might require the EPA to issue GHG NAAQs since they supercede CAA §111(d), discouraging the EPA from expending limited resources on performance standards; performance standards are technical and data intensive; and regulations of individual sources will likely prove more expensive than economy-wide standards
  5. A flexible performance standard under §111(d) could reduce greenhouse gas emissions by  5–10 percent in the coal sector—as much as about 3 percent of total U.S. emissions—without changing the level of electricity generation, at costs more modest than national climate change legislation that passed the U.S. House in 2009;
  6. However, in the longer term, at least, regulation under the CAA could neither facilitate the most efficient opportunities for emissions reductions, nor would it provide the same level of long-term regulatory certainty essential to drive requisite investments.

Be Sociable, Share!