With the US out of the Kyoto Protocol, and the current Bush administration opposed to mandatory federal regulation, there have been several bills floated in the Senate, and several initiatives by the states. But so far, despite several bipartisan efforts (notably the McCain-Lieberman bill, and others), none of the Senate bills has attained a majority vote (save the Bingaman-Domenici non-binding resolution in 2005), and no bill has passed the House. Meanwhile, the states have pursued both regulation (e.g. in California and in the group of Northeastern states called RGGI) and litigation (e.g. public nuisance suits against large corporate emitters). But the states' actions may be constrained by several legal obstacles including the political question doctrine, Dormant Commerce Clause, Dormant Treaty Clause, and Interstate Compacts Clause. More important, the limited impact of states' actions on global emissions, and the potential for "leakage" of emissions from regulated to unregulated jurisdictions, mean that the states' actions could be ineffective or even perverse.
After Mass v. EPA, the EPA has the authority to regulate greenhouse gas (GHG) emissions from motor vehicles. (As the majority opinion noted, EPA could still decline to exercise that authority; but it would likely be sued again.) But regulating just the motor vehicle sector would impose high costs for small gains. And vehicles’ CO2 emissions are already partly regulated by federal fuel economy standards. An economy-wide approach to GHGs would yield more environmental effectiveness at lower cost.
Broader authority now looks likely. Another case, Coke Oven Envt'l Task Force v. EPA, had been stayed in the DC Circuit pending the Supreme Court's decision in Mass v. EPA; in the Coke Oven case, the EPA could now be found to have similar authority to regulate GHG emissions from stationary sources such as electric power plants (under Clean Air Act sections 108, 109 and 110). But that part of the Clean Air Act tells EPA to set national ambient air quality standards, which states must then attain through state implementation plans (SIPs). The problem here is that no state could effectively alter its own ambient level of greenhouse gases, because that ambient level depends on the global concentration of such gases, which in turn depends on global emissions and sink removals. So this state-implemented part of the Clean Air Act is a mismatch for a globally mixing air pollutant.
Yet there is a creative way that EPA could bring these programs together into a unified federal program that would overcome the weaknesses of state-level and sector-specific programs. EPA could set a national ambient level, and then find the states' implementation plans to be inadequate (or the states might simply decline to submit their plans). In that situation, the Clean Air Act gives EPA the authority to issue a federal implementation plan (FIP). EPA (ideally in collaboration with other federal agencies such as Energy, Transportation, Interior, and Agriculture) could then use a FIP to institute a national, economy-wide cap-and-trade program that cost-effectively reduces greenhouse gas emissions.
A US approach undertaken in concert with other major emitters not yet constrained by Kyoto - - such as China, India and Brazil - - would be even more cost-effective. If anything is worth doing about climate change, such an international approach using cost-effective market-based incentives is surely the best. So, in collaboration with the State Department, EPA could make the FIP contingent on similar action by other major emitting countries, so that the FIP would actually influence ambient levels of greenhouse gases.
Would EPA take this EPA creative route to adopt a national GHG emissions trading program under its current statutory authority? Should it? Or should it leave it to the Congress to enact a new law for GHGs? EPA has been reluctant to adopt FIPs in the past, fearing the political reaction to federal controls on local air pollution sources. But industry, NGOs and even the states (who fear emissions leakage to other states) might well prefer a uniform federal program to a patchwork of inconsistent state programs, especially for globally mixing pollutants with no local health impacts. And the two houses of Congress may not be able to agree on a single approach before EPA acts (or the Congress may enact a flawed approach). EPA action could thereby deflect more costly and less effective strategies from other quarters. EPA itself has been creative in the past in designing new cap-and-trade programs, such as the original emissions offsets, bubble & netting programs that the Supreme Court essentially approved in Chevron, and the highly successful phasedown of lead in gasoline; and EPA adeptly managed the landmark acid rain trading program in the 1990 Clean Air Act.
Short of a new and improved international treaty, or a well-drafted act of Congress, the new EPA strategy I suggest here could be the best option for sensible climate policy. It would give the Presidency (both now and after 2008) and the federal policy experts, rather than the states or the Congress, the leading role. Through interbranch competition, it would help empower the best ideas in the Congress. The parochial distortions recently manifested in the European Union’s GHG emissions trading system suggest that careful expert design is superior to local politics as a way to fashion large cap-and-trade programs. Of course, this scenario depends on EPA deciding to exercise its authority, which in turn depends on presidential politics.
For more on my views, see, e.g., Richard B. Stewart & Jonathan B. Wiener, Reconstructing Climate Policy: Beyond Kyoto (AEI Press, 2003); and Jonathan B. Wiener, “Think Globally, Act Globally: The Limits of Local Climate Policies," -- U. Penn. L. Rev. -- (forthcoming).