The pitfalls of just saying ‘no’ to EPA’s carbon rule

Coal Fossil Fuel Power Plant Smokestacks Emit Carbon Dioxide Pollution

If states like Alabama don’t submit a carbon-reduction plan or request an extension by Sept. 6, 2016, the U.S. Environmental Protection Agency will impose what amounts to a cap-and-trade system, energy prices will increase and state economies will suffer.

Yes, I know the majority of states are challenging the EPA’s carbon rules in court. They might even secure a stay of the Clean Power Plan’s (CPP) implementation timeline by as early as the first quarter of next year.

Yes, I’m acutely aware that Republicans plan to win the White House, retain the House and Senate and pick up enough seats to end filibusters.

Let’s just stipulate that President Barack Obama circumvented Congress on carbon regulation. The CPP is all over the place – with different building blocks and “cooperative federalism” – simply because EPA authority to reduce greenhouse-gas emissions isn’t particularly expansive.

Let’s also agree that the CPP will cause electricity rates to increase. Nobody is credibly arguing that it won’t—not even the EPA. The agency, making a number of bold assumptions, anticipates a 3 percent increase in average electricity prices by 2020.

There are reasons to question whether the CPP would even shrink carbon emissions by more than already is occurring from ordinary market forces. Increased use of natural gas has reduced carbon emissions from utilities by about half of the CPP’s targeted reductions, without any additional government coercion. Coal simply can’t compete with lower-emission natural gas because of market prices and existing emission restrictions. But why let the market continue to address pollution when we can hit our economy with yet another unwieldy EPA regulation?

Unfortunately, all that basically means is that conservatives don’t like the CPP and plan to stop it through judicial and political victories. That’s certainly one strategy to deal with the CPP. But what happens if a court doesn’t stay implementation of the rule, litigation fails altogether or elections don’t turn out well for conservatives?

The goal should remain exactly the same: protect ratepayers.

At a minimum, states should submit a request for a state implementation plan (SIP) extension to buy some additional time. That gives them until 2018 to submit a final plan. The EPA already anticipates states will look to comply in bad faith, so they issued a memo in October outlining criteria for acceptable extension requests. Essentially, these boil down to a rough sketch of the plans being considered, an explanation for why the extension is needed and an opportunity for public comment on the state’s planning effort.

It’s not a tall order. For states who successfully appeal for extension, the delay will offer time to glean a slightly better picture of the political dynamics and the prospects for courtroom success before proceeding with a final plan, if necessary.

If there’s no stay and no political sea change, the only way to stop the EPA from taking over a state’s energy generation market is to submit a compliance plan. States must decide how to do so in the least economically harmful way available. Those options essentially boil down to some combination of carbon cap-and-trade, shutting down fossil fuel generation and pricing carbon.

A direct carbon price is the only option that has the capacity to offset economically harmful taxes, such as those applied to income and sales. It’s also administratively simple and protects customers from bearing the cost burden of compliance in neighboring states. Ironically, it also has the potential to serve as a declining revenue stream over time, which could shrink the size of government.

It really doesn’t matter how states engage, so long as they realize that sitting on their hands isn’t an option. Even as they are fighting the CPP, conservatives need to focus on protecting consumers from electricity rate hikes. Right now, that means discussing those ideas openly and, at a minimum, asking the EPA for a little more time to figure it out.

That isn’t throwing in the towel on the CPP; it’s just smart.

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