Low-Energy Fridays: Regulators Gonna Regulate
Not long ago, I wrote about the administration’s proposed requirements for vehicles, which would effectively mandate electric vehicle (EV) sales. I pointed out that, given the Supreme Court’s decision in West Virginia v. Environmental Protection Agency (EPA), the rule’s legality is a big stretch. Effectively, if the Clean Power Plan (CPP) was illegal, so too would be regulations that take the same approach of setting standards that are impossible for industry to comply with absent behavioral shifts that otherwise exceed the EPA’s authority to mandate.
But even though the Biden administration can’t explicitly do a CPP 2.0, they are attempting to force a rule on power plants that is very similar and that will likely be shot down by the courts, which begs the question: Why? Today we’ll explore the incentives surrounding regulatory policy that encourage regulators to act even when they know it can’t last, and why that can be a problem.
There are three big reasons regulators regulate, even when they know it might exceed their authority. The first is that even if the courts shoot down the rule in the future, it may not matter because the targeted industry has already made a transition to comply with the regulation. As an example, even though the Supreme Court shot down the Mercury Air Toxics Standards three years after the rule was finalized, the power sector had already transitioned to comply with it, meaning the EPA was able to regulate outside of its authority effectively.
The second reason is that even though many regulations might functionally be similar, the specific statutes they fall under often vary. Some scholars hypothesized that even if the CPP were not legal under Section 111 of the Clean Air Act, then perhaps it could be legal if implemented under another section such as 115. Just because a rule gets shot down once, it doesn’t guarantee that will happen again, and regulators don’t know the limits of their authority without testing them.
And the third reason is good old-fashioned politics. Long-shot regulations make it seem like the administration is governing, even if it isn’t a particularly effective means of doing so. It also puts industry, which often boasts of its progress on regulated issues, in an awkward position of having to put their money where their mouths are and potentially look bad in the public eye if they openly oppose regulations the public favors.
All in all, regulators don’t really lose anything by trying to impose regulations that aren’t likely to succeed. And that’s also part of the problem because governance through regulations that may or may not last does not make for great policy.
As was seen during the Trump administration, regulations are subject to change under future administrations. They also suffer from diminishing returns, as the pool of capturable benefits from new regulations shrinks after each one, and the lowest-cost intervention opportunities have already been adopted.
The executive branch always has an incentive to keep regulating—especially when they don’t view legislation as an opportunity. President Barack Obama said, “I’ve got a pen, and I’ve got a phone” after Democrats lost their congressional majority, threatening executive action outside legislative confines. But if policymakers want to implement policy that is both more effective and durable, it needs to happen through Congress. Otherwise, we will continue to see the current approach: a lot of regulations of varying effectiveness and uncertain longevity.
