At a press conference on December 15, 2008, President-elect Barack Obama announced members of his environment and natural resources team. Obama has selected Nobel Prize-winning physicist Steven Chu to lead the US Department of Energy; former New Jersey Department of Environmental Protection Commissioner Lisa Jackson to head the US Environmental Protection Agency (EPA or the Agency); Clinton-era EPA Administrator Carol Browner to be “climate czar;” and Los Angeles Deputy Mayor for Energy and Environment Nancy Sutley to lead the White House Council on Environmental Quality. Rounding out Obama’s “green team” and announced on December 17 were Iowa Gov. Tom Vilsack to become Secretary of Agriculture and Colorado Sen. Ken Salazar to become Secretary of the Interior.

One of the most high-profile and urgent issues with which Obama’s environmental team will grapple soon after taking office is climate change. President-elect Obama favors an economy-wide cap-and-trade program and is committed to addressing climate change through government action, although it remains uncertain what form that action will take.

Certainly, on the one hand, there is interest on Capitol Hill in legislation. Several congressional committees will have a direct role in crafting climate change-related legislation, including the House Energy and Commerce Committee, the House Committee on Energy Independence and Global Warming, the Senate Environment and Public Works Committee, and the Senate Energy and Natural Resources Committee. In October 2008, the House Energy and Commerce Committee released 461-page draft legislation aimed at reducing greenhouse gas (GHG) emissions. Other committees have held oversight hearings on the issue and are expected quickly to begin forming their own legislative response to the issue. The House Ways and Means and Senate Finance Committees also will have an indirect role in such legislation to the extent that tax credits or incentives are used to encourage private sector activities that reduce GHG emissions. The broad scope of the issue and the large number of interested parties, however, will make speedy passage of legislation challenging.

On the other hand, new legislation may not be necessary.  The US Supreme Court has held that regulation of GHGs also would be possible under the existing authority of the Clean Air Act (CAA).  As envisioned by the Bush administration, however, such regulation would not be pretty.  In the summer of 2008, EPA released an Advanced Notice of Proposed Rulemaking (ANPR) outlining the Agency’s thinking on potential CAA regulation of GHG emissions.  Despite what could be a very different attitude from the Obama administration regarding the viability of such broad regulation, the Bush era outline will likely serve as a starting point for discussions on how to address the United States’ contribution to global climate change.  The ANPR will serve either as a guidepost or a warning to both incoming Obama administration officials and the 111th Congress.

EPA published the ANPR in the Federal Register on July 30, 2008 (73 Fed. Reg. 44, 354). The impetus for EPA’s action was the Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497 (2007), in which the Court held that EPA has authority to regulate GHG emissions under the CAA’s sweeping definition of “air pollutant.”  Carbon dioxide and other GHGs, the Court found, are air pollutants as contemplated by the Act because the statute covers “any air pollution agent or combination of such agents, including any physical, chemical . . . substance or matter which is emitted into or otherwise enters the ambient air . . . .” 

The Court did not order the Agency to begin regulating GHGs, however.  Instead, it directed EPA to determine whether such emissions endanger public health or welfare – a determination that will now be made by an Agency with new leadership and driven by the priorities of a new White House. 

The Bush administration’s discomfort with GHG regulation under CAA authority is obvious from the ANPR itself.  The notice was prefaced by opinions from various other federal agencies (including the Departments of Agriculture, Commerce, Energy, and Transportation) criticizing the use of the CAA to regulate GHG emissions.  Indeed, the White House also publicly denounced the ANPR and called for new legislation to address climate change.  EPA Administrator Stephen Johnson not only included those dissenting opinions in the notice in order to “seek comment on the full range of issues they raise,” he added his own voice to the chorus, finding the CAA “ill-suited for the task of regulating global greenhouse gases.”  Further, he noted that “the potential regulation of [GHGs] under any portion of the CAA could result in an unprecedented expansion of EPA authority that would have a profound effect on virtually every sector of the economy and touch every household in the land.” 

The ANPR repeatedly emphasizes the tremendous scope of the CAA’s potential authority to impact every industry and, indeed, every home.  For example, it includes hundreds of specific proposals for the potential regulation of GHG sources as disparate as industrial power plants, manufacturing operations, on-road vehicles, agricultural vehicles, lawnmowers, aircraft and commercial buildings.    

The key message of the document is that virtually every sector of the economy, regardless of the level of their GHG emissions, would be impacted by a comprehensive regulatory program under the CAA.  EPA also sought to remind the public that, despite the massive scope of GHG regulation, regulation alone will not be sufficient to address climate change.  Market-based incentives such as a cap-and-trade system and a carbon tax will also be needed to complement any regulatory approach towards controlling climate change.  The close coordination of Obama’s energy and environment team – emphasized by the creation of a new “climate czar,” Carol Browner – is a strong indicator that the new administration will not shy away from such an integrated approach.

Finally, the ANPR emphasizes the need for an increase in energy efficiency as a critical mechanism to reduce GHG emissions, an approach that the EPA would apply to each industry and individual source of GHGs by suggesting “technological controls and operational measures” that may be available.  Again, the Obama team comes ready to tackle these challenges.  For example, Department of Energy Secretary-designee Chu has expressed strong support for energy savings through technologies such as more efficient building systems.

The ANPR serves as a snapshot of what CAA regulation of GHGs could look like, for better or for worse.  Such regulation would have sweeping impact on practically every American endeavor and it still would not be enough.  Any regulatory approach to climate change must be accompanied by increased energy efficiency and market-based incentives to have any hope of meaningful change.  It remains to be seen whether the themes outlined in the recent ANPR will be used as a playbook for GHG regulation under the CAA, as a threat with which to encourage Congress to pass GHG-specific legislation, or as the basis for some other approach.  In any event, the document provides important insight into the challenges ahead in this critical aspect of environmental policy. 

For more information about the potential impact of federal GHG regulation on your industry or company, please contact Joanne Hawana, Joe Keeley, or Rachel Lattimore.