Clean Power Plan ruling puts states in a bind
At least 27 states have challenged the CPP, under which U.S. power plants must reduce their carbon dioxide emissions to 30 percent below 2005’s levels by 2030. Those lawsuits are still underway. What the court did was refuse to grant a “stay” blocking the rule from taking effect until the legal challenges are resolved.
Such injunctions are rarely granted, and failure to obtain one doesn’t necessarily mean the challenge will be unsuccessful. Nonetheless, the inability to secure a stay is a major setback for the challengers, who are fighting both the clock and the feds. Challenges to federal agency rules can take years to resolve. Meanwhile, the CPP will move forward.
Under the timeline set by the EPA, states must submit a plan to achieve the required emissions reductions by September. If a state refuses to submit a plan, the EPA will instead impose its own. States can seek a two-year extension, but even in that case, the lawsuits may not be resolved before states are forced to either submit a plan or risk having a federal plan imposed upon them.
The reality is that power companies have to make decisions about how to invest years in advance. In practice, this can mean that, even where a legal challenge wins, it still loses. Last year, for example, the Supreme Court invalidated the EPA’s Utility MACT rule governing mercury emissions from power plants. Yet by the time the case was resolved, the industry had already made all the changes required by the rule.
When it comes to the CPP, states no longer can afford to sit back and hope litigation will take care of things. Instead, they need to be proactive in developing the plans that work best for them. First and foremost, this means getting a two-year extension, which the EPA has made relatively easy to do. Beyond that, they need to look at ways to limit the CPP’s economic harms, and perhaps even use compliance as an opportunity to meet other objectives.
In particular, states should look at using the CPP as a vehicle to facilitate cuts to existing taxes. Under the CPP, states have the option to comply by imposing a fee on CO2 emissions from existing power plants. The revenue generated by these fees could offset cuts to state income, corporate, sales, or other taxes. If properly structured, pro-growth tax cuts could cancel out the negative effects of the higher electricity prices the CPP would cause and reduce emissions in the most economically efficient manner.
Preparing a state plan along these lines wouldn’t mean giving up on stopping the CPP, either through the courts or through the political process. But it would mean facing up to the reality that opposing the CPP isn’t necessarily going to stop it from happening.
States should prepare for all eventualities. If they don’t, they may find themselves living under a plan designed to suit the interests of federal bureaucrats, rather than their own citizens.