Climate change

A Tax on the EPA’s Power: The Supreme Court and the Future of Carbon Pricing

April 27, 2023
Climate Change, Energy Law, Environment, EPA, Tax

Quinn Milligan, MJLST Staffer

As climate change becomes a topic of increasing popularity worldwide, policy makers and the legal community alike have turned their attention to fashioning appropriate mechanisms to address carbon emissions. Of the myriad proposals made in recent years, carbon pricing has come to the forefront of climate policy regimes worldwide. Although carbon pricing has been implemented in various parts of the world, the legal system of the United States presents various legal challenges.

Carbon pricing, at a simple level, is an economic tool designed to reduce carbon emissions by forcing individuals and companies to internalize the externality price of the carbon they emit.^[1] Caron pricing is implemented predominantly in one of two methods: cap-and-trade systems or a carbon taxation system. A cap-and-trade system is the process of placing a “cap” on the amount of carbon (measured in tons) that can be emitted by those under the regulatory purview of the given cap-and-trade; typically companies are the target of these systems. Once the emissions cap has been set, the regulators allocate “allowances” for all or part of the total cap. Companies that emit less than their allocated cap can sell or trade their remaining allowances to other companies under the cap-and-trade regulation. In essence, the cap-and-trade system creates a monetary incentive for companies to reduce their carbon emissions.^[2] In contrast, a carbon tax is much more straightforward. Carbon taxes are imposed on the emission of carbon dioxide that arises through production or consumption of fossil fuels based on the amount of carbon dioxide those activities produce.^[3] The tax will be assessed per unit of emissions, typically per ton of carbon dioxide.

Both carbon taxes and cap-and-trade systems are designed to create an economic incentive for companies to reduce their carbon emissions in order to combat climate change at a large scale. While there are various economic arguments for and against the efficiency of both carbon taxes and cap-and-trade systems, there is evidence that both can be effective when well designed and administrated. Importantly, the goal of both main forms of carbon pricing is to take advantage of the financial rationality of actors in the economy and incentivize them to reduce their carbon emissions. Ultimately the policy goal behind incentivizing reduction in carbon emissions is to combat climate change by shifting the burden onto the polluters.^[4]

While carbon pricing systems have proven to be an effective method of reducing carbon emissions, the legal system presents important challenges to their implementation. The most recent challenge to the ability of regulators and policy makers came from the Supreme Court’s recent decision to curtail the power of the Environmental Protection Agency (EPA) to limit carbon emissions in West Virginia v. Environmental Protection Agency.^[5] The Supreme Court’s decision in late June of 2022 dictated that the EPA cannot put state-level caps on carbon emissions under the Clean Air Act of 1970. The Supreme Court went on to clarify that the power to decide how the U.S. would power itself lies with Congress, and decisions on emissions must come from Congress.^[6] The decision represents a signal from the Supreme Court to regulatory agencies generally, not just the EPA, that regulations must arise from the powers specifically delegated by Congress to those agencies.

Previously, the EPA had been using the Clean Air Act to regulate climate change in various manners, particularly through regulation of carbon emissions. In specific, the Court found that the Clean Power Plan established under the Obama administration exceeded the regulatory power granted to the EPA by Congress under the Clean Air Act.^[7] The Supreme Court further decided that the power to promulgate rules which would have transformational impacts on the economy must be specifically granted by Congress to regulatory agencies.^[8] In this specific context, the Court ruled that the regulation of carbon emissions sought by the EPA would have such transformational impacts on the economy. The Court specified that any time a regulatory agency in the U.S. attempts to promulgate any rule which may have a transformational impact on the economy – which was to regulate carbon emissions and address climate change in this instance – the rule would be presumptively invalid unless Congress had already specifically authorized the agency to promulgate rules and regulations in the area.

This ruling significantly reduces the EPA’s ability to regulate carbon emissions and climate change.^[9] The importance of this decision is not so much that the EPA will never be able to regulate carbon emissions or attempt to address climate change, but instead that the accomplishment of the policy goals underlying EPA regulation will certainly be delayed. Because the majority decision emphasized that regulatory decisions of economic and political significance must be supported by clear Congressional authorization, the EPA has been thrown into a sort of stalemate. The direct finding in West Virginia v. EPA that the Clean Power Plan was not adequately supported by Section 111(d) of the Clean Air Act set the EPA’s timetable for accomplishing its policy goals back years.

As many have noticed in recent years, extreme weather events have become more frequent and more severe; our climate is changing before our very eyes. One of the most ironic features of this Supreme Court decision is that the growth of the administrative state maligned by the majority opinion has directly accompanied extreme increases in atmospheric carbon dioxide levels the Clean Power Plan aimed to combat.

Although carbon pricing systems have shown promise in incentivizing participants in the global economy to decrease their carbon emissions, the Supreme Court’s decision in West Virginia v. EPA certainly made it difficult for the EPA to enact any sort of carbon pricing scheme in the near future.^[10] At a time when climate change is only becoming a more important issue, the Court’s decision has made the primary environmental agency in the U.S. less able to achieve policy goals that would combat it. While other countries have found success implementing carbon pricing systems, at least for the time being, that option appears unavailable in the U.S.

Notes

^[1]https://seors.unfccc.int/applications/seors/attachments/get_attachment?code=TJQGYTI096K3J33ANM1HDWYEU51VRXNC

^[2] https://www.edf.org/climate/how-cap-and-trade-works

^[3] https://www.c2es.org/content/carbon-tax-basics/

^[4] https://www.worldbank.org/en/programs/pricing-carbon

^[5] https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf

^[6] https://www.cfr.org/in-brief/supreme-court-epa-west-virginia-ruling-delay-us-climate-change-action

^[7]https://www.cnbc.com/2022/06/30/-supreme-court-says-epa-lacks-authority-on-climate-standards-for-power-plants.html

^[8] https://www.supremecourt.gov/opinions/21pdf/20-1530_n758.pdf

^[9] https://www.npr.org/2022/06/30/1103595898/supreme-court-epa-climate-change

^[10]https://www.hsph.harvard.edu/news/features/the-supreme-court-curbed-epas-power-to-regulate-carbon-emissions-from-power-plants-what-comes-next/

Electric Vehicles: The Path of the Future or a Jetson-Like Fantasy?

November 6, 2022
Administrative Law, Climate Change, Energy Law, Industry, Infrastructure, Social Welfare, Supply Chain, Transportation

James Challou, MJLST Staffer

Last week President Biden contributed to the already growing hype behind electric vehicles when he heralded them as the future of transportation. Biden touted that $7.5 billion from last year’s infrastructure law, Public Law 117-58, would be put toward installing electric vehicle charging stations across the United States. This mass rollout of electric vehicle chargers, broadly aimed to help the US meet its goal of being carbon neutral by 2050, constitutes an immediate effort by the Biden administration to tackle pollution in the sector responsible for the largest share of the nation’s greenhouse gas emissions: transportation. The administration’s short-term goal is to install half a million chargers by 2030. However, not all are as confident as President Biden that this movement will be efficacious.

The “Buy America” Obstacle

Despite President Biden’s enthusiasm for this commitment to funding widespread electric vehicle charging stations, many experts remain skeptical that supply can keep up with demand. Crucially, Public Law 117-58 contains a key constraint, dubbed the “Buy America” rule, that mandates federal infrastructure projects obtain at least 55% of construction materials, including iron and steel, from domestic sources and requires all manufacturing to be done in the U.S.

Although labor groups and steel manufacturers continue to push for these domestic sourcing rules to be enforced, other groups like automakers and state officials argue that a combination of inflation increasing the cost of domestic materials and limited domestic production may hamstring the push towards electric vehicle charging accessibility altogether. One state official stated, “A rushed transition to the new requirements will exacerbate delays and increase costs if EV charging equipment providers are forced to abruptly shift component sourcing to domestic suppliers, who in turn may struggle with availability due to limited quantities and high demand.”

Proponents of a slower implementation offer a slew of different solutions ranging from a temporary waiver of the Buy America rules until domestic production can sustain the current demand, to a waiver of the requirements for EV chargers altogether. The Federal Highway Administration, charged with oversight of the EV charger program, proposed an indeterminate transitional period waiver of the Buy America rules until the charger industry and states are prepared to comply with requirements.

Domestic Manufacturer Complications

Domestic manufacturers are similarly conflicted about the waiver of the Buy America rules, with some thinking they may not be able to meet growing demand. While many companies predict they can meet Buy America production requirements in the future, the Federal Highway Administration specified in its waiver proposal that a mere three manufacturers, all based in California, presently believe they have existing fast charger systems that comply with Buy America requirements.

Predictably, the waiver proposal is divisive amongst domestic manufacturers. Some companies are onboard with the waiver and requested even more flexibility. This includes automakers like Ford and General Motors, who say that a process of moving all supply chains to the US demands more time, particularly at the scale necessary to match the surge in federal funding. This is largely seen as the most stakeholder friendly move as it offers companies the opportunity to use the duration of the waiver to see if a clear competitive market materializes which in turn benefits stakeholders.

Contrarily, others have asked for the waiver period to be shortened to allow them to quickly recoup their investments into Buy America compliant manufacturing upgrades. Some companies are even more aggressive; they oppose the waiver altogether and argue that the waiver would disadvantage manufacturers that intentionally put money into meeting the Buy America requirements. These companies posit that domestic manufacturing provides immediate benefits like augmenting supply chain security and electric-vehicle cybersecurity and warn against dependency on foreign governments for electrical steel needs. They further add that the Buy America rule will fuel growth in the US market and create manufacturing jobs. Labor groups and some lawmakers have adopted this stance as one lawmaker from Ohio commented, “[f]ederal agencies should implement the new Buy America provisions as quickly as possible to give American companies the certainty they need to move forward with investments.”

Other Implementation Difficulties

The inclusion of the Buy America rule in this legislation is not the only aspect of the EV charging project that has generated considerable debate. Regional challenges pose more of an issue than originally anticipated. Although many states reported common potential hurdles like vandalism, range anxiety, supply chain, and electricity challenges, unique geographic problems have also arisen. For example, Nebraska reported in its plan that a shift to electric vehicles could decrease revenue collection from gas tax. Iowa aired out concerns about stations being hit by and damaged by snow plows. Michigan cited rodent damage as a potential concern. Finally, Oklahoma flagged political opposition to the chargers as a problem that could be both pervasive and fatal to the overall electric charging process.

Moreover, the law caught a substantial amount of flak for a curious decision to skip interstate rest stops when installing the EV charging stations. Although at first glance this would appear to be a pivotal oversight, it stems from a 1956 law that restricts commercial activity, in this case including electric car charging, at rest stops. The Federal Highway Administration, to alleviate these concerns, issued guidance that says electric vehicle chargers should be “as close to Interstate Highway Systems and highway corridors as possible” and generally no more than one mile from the exit. Furthermore, some of the older rest stops are excluded from the 1956 guidance. However, this is not enough to sate critics as many continue to fight for the 1956 law to be changed. They claim that the existence of the restriction drastically inconveniences drivers, planners, and vehicles while potentially creating a wealth disparity by forcing low-income families, who traditionally rely more on public rest areas, to avoid purchasing electric vehicles.

Conclusion

President Biden deserves to be lauded for his ambitious plan for electric vehicles which attempts to square combating the effects of climate change with preserving American manufacturing while simultaneously improving infrastructure. It is worth questioning whether the law would be more effective if it simply focused its efforts on one of these areas. As a commentator at the Cato Institute noted, “The goal of infrastructure spending should be better infrastructure — and if you’re trying to pursue policies to mitigate climate change, well that should be the overall goal … Anything that hinders that should be avoided.” Only time will reveal the answer to this question.

Localized Climate Change: A Glance at the Minneapolis Climate Action Plan

April 22, 2014
Environment

Matt Mason, MJLST Staff

Historically, the climate change mitigation arena has centered almost exclusively on traditional national and supra-national actors. However, persistent failures in seeking widespread agreement among many nations with diverging interests have recently given rise to experiments in climate change mitigation by nontraditional actors at the sub-national and sub-state level.

Myanna Dellinger recently wrote an excellent and informative article advocating for the need to implement local climate change initiatives. Dellinger examined a number of recently adopted local climate change initiatives, arguing that bottom-up methods can indeed be an effective alternative to the more traditional top-down approaches. With nontraditional local government and non-government actors becoming more involved in climate change mitigation due to lack of effective action of the traditional climate change actors, Dellinger concluded that “local initiatives currently present the most promising course of action for effective climate change solutions.” Effective local climate change solutions should focus on a number of factors, according to Dellinger, including carbon reduction, public participation, improved energy infrastructure, and the mobilization of private entities. Additionally, Dellinger found that city programs with some degree of enforcement, such as exclusion for non-compliance and public disclosure of progress, tend to be more effective.

The City of Minneapolis has a history of implementing climate change initiatives at the local level, starting with the Minneapolis – St. Paul CO2 Reduction Projection in 1993. In 2004, then Mayor R.T. Rybak signed the U.S. Conference of Mayors Climate Protection Agreement pledging to take action to reduce greenhouse gas emissions. Most recently, the City of Minneapolis adopted the Minneapolis Climate Action Plan this past June.

The overall goals of the Climate Action Plan are to reduce emissions by 15% in 2015, and 30% by 2025. The Plan seeks to achieve collaboration between local government, businesses, civic organizations, and residents alike to not only reduce emissions, but also improve public health, shift to a more energy efficient economy, generate more electricity from local and renewable sources, and to promote cleaner fuel use throughout the public transit system. To achieve these goals, the Plan itself focuses on three key sectors: buildings and energy (with commercial and residential buildings being the largest source of emissions in 2010 totaling 65% of all emissions), transportation and land use (with transportation representing the second largest emitter at 29% of total emissions in 2010), and waste and recycling (including the goal of increasing the recycling rate to 50% by 2025).

While we often do not think about the impacts of climate change at the local level, the Climate Action Plan highlights a number of localized effects of recent climate change. For example, since 1970 the average annual precipitation in the Minneapolis area has increased by 20%. Additionally, average air temperatures are increasing, with the greatest warming trend at night and in the winter months, which is consistent with higher concentrations of greenhouse gasses in the atmosphere. If the current climate trends continue, the Plan projects difficult summers ahead with increasingly common heat waves and “extreme heat events.” Not to mention to projected increase in days with low air quality and a general increase in the level of ozone pollution.

While it remains to be seen just how effective the Minneapolis Climate Action Plan will be, it appears to be relatively in line with the localized climate change policies advocated for by Dellinger. The Plan requires progress to be reported annually, and provides that climate reduction goals and strategies must be revisited at a minimum of every three years. In addition, the Plan seeks to improve the energy infrastructure by making environmental and infrastructural benefits more equitable between low-income communities and elsewhere in Minneapolis. Furthermore, the Plan seeks the involvement of private entities and the public at-large. On a broad policy level, the Plan prioritizes “high impact, short timeframe,” and cost effective strategies, while attempting to implement strategies with multiple benefits to the climate change problem. Time will tell whether Minneapolis’s own localized climate action plan will see effective results such as those analyzed by Dellinger, but hey, you have to start somewhere.

Guest Commentary – Climate Change: Is Anyone Ever Going to Do Anything about it?

February 3, 2014
Environment, Public Health

by Myanna Dellinger, JD, MA – Associate Professor at Western State College of Law and Director of the Institute for Global Law and Policy

Extremely cold weather conditions still haunt the American North and Northeast. Meanwhile, California is suffering through July temperatures in January and the worst drought since 1895. No doubt about it, we are witnessing ever more frequent extreme weather events. Since nations still can’t agree on what to do about this urgent problem, it may be up to local actors such as cities, states, companies, and NGOs to take the required action now.

Nations have agreed to “try” to limit global warming to 2° C and to agree on a new climate treaty by 2015 to take effect by 2020, but in reality, we are headed towards a 5.3° C increase. Even if the 2° degree target were to be met, vast ecological and economic damage would still occur in the form of, for instance, severe economic disruptions to our food and water supply.

Disregarding climate change is technologically risky too: to meet the target of keeping concentrations of CO2 below the most recently agreed-upon threshold of 500 ppm, future generations would have to literally pull CO2 out of the air with either machinery that does not yet exist and may never become technically or economically feasible, or with bioenergy crops that absorb CO2, which would compete with food production.

My article “Localizing Climate Change” argues that effective and urgent action is likely to come from the local and not the national or international levels.

In fact, the parties to the climate treaty framework UNFCCC similarly recently agreed that cities, other subnational authorities, and the private sector must play a role in future treaty-making contexts. This makes sense. Local actors may be the ones best situated to find out what can be done technically and politically in each location. Meanwhile, nations are almost unbelievably playing two fiddles at the same time, subsidizing fossil fuel development much more than cleaner energies. That’s right: although renewable energy policies are becoming more prevalent, they are financially and politically outcompeted by the rapid growth of fossil fuels in the USA and elsewhere. Perhaps indicative of the true state of affairs is the fact that climate adaptation talks are intensifying as mitigation agreements seem to be stalling. It doesn’t help that a secretive network of conservative billionaires is pouring billions of dollars into a vast political effort attempting to deny climate change and that–perhaps as a consequence–the coverage of climate change by American media is down significantly from 2009, when media was happy to report a climate change “scandal” that eventually proved to be incorrectly reported. Little wonder that the most recent IPCC report concluded that it is “extremely likely” (i.e. with 95-100% certainty) that human activity is the principal cause of climate change.

If you think all this is driving you crazy, you may be right. Shifts in climate have been strongly linked to human violence around the world, such as spikes in domestic violence in Australia, increased assaults and murders in the United States, land invasions in Brazil, police violence in Holland, and civil conflicts throughout the tropics.

What are we, as a nation, doing about this? In the summer of 2013, President Obama announced the first-ever United States Climate Action Plan. This relies on a number of Executive Orders, as the Senate is still unlikely to ratify a climate treaty. As with other recent Congressional gridlock, this highlights the importance of local action. If the United States was willing to ratify a new climate change treaty, this could spur much-needed action by the relatively low number of nations needed to make a big impact on the problem. After all, the world’s top ten emitters account for 70% of global greenhouse gas emissions.

This leads to my questions: Where is the most likely and substantively effective action going to come from: local or national/supranational entities? If you think climate change must be countered at the national and international levels, who is then responsible? For instance, should it be the historically largest emitters (among them, the USA and China), the most capable (the industrialized world), the most progressive (arguably the EU), or . . . ? Is anything even going to happen at all, or are we as human beings simply incapable of worrying about the future as a recent study indicated?

Making it Personal: The Key to Climate Change Action

December 22, 2013
Environment

by Brandon Palmen, UMN Law Student, MJLST Executive Editor

Climate change is the ultimate global governance challenge, right? It’s an intractable problem, demanding a masterfully coordinated international response and a delicate political solution, balancing entrenched economic interests against deeply-discounted, diffuse future harms that are still highly uncertain. But what if that approach to the problem were turned on its head? We often hear that the earth will likely warm 3-5 degrees centigrade (+/- 2 degrees), on average, over the next hundred years, and we may wonder whether that’s as painful as higher utility bills and the fear of losing business and jobs to free-riding overseas competitors. What if, instead, Americans asking “what’s in it for me?” could just go online and look up their home towns, the lakes where they vacation, the mountains where they ski, and fields where their crops are grown, and obtain predictions of how climate change is likely to impact the places they actually live and work?

A new climate change viewing tool from the U.S. Geological Survey is a first step toward changing that paradigm. The tool consolidates and averages temperature change predictions based on numerous climate change models and displays them on a map. The result is beautiful in its simplicity; like a weather map, it allows everyday information consumers to begin to understand how climate change will affect their lives on a daily basis, making what had been an abstract concept of “harm” more tangible and actionable. So far, the tool appears to use pre-calculated, regional values and static images (to support high-volume delivery over the internet, no doubt), and switching between models reveals fascinatingly wide predictive discrepancies. But it effectively communicates the central trend of climate change research, and suggests the possibility of developing a similar tool that could provide more granular data, either by incorporating the models and crunching numbers in real time, or by extrapolating missing values from neighboring data points. Google Earth also allows users to view climate change predictions geographically, but the accessibility of the USGS tool may give it greater impact with the general public.

There are still challenging bridges to be crossed — translation of what “N-degree” temperature changes will likely have on particular species, and “tagging,” “fencing,” or “painting” of specific tracts of land with those species — but it is plausible that within a few years, we will be able to obtain tailored predictions of climate change’s impact on the environments that actually matter to us — the ones in which we live. Of course those predictions will be imprecise or even wholly incorrect, but if they’re based on the best-available climate models, coupled with discoverable information about local geographic features, they’ll be no worse than many other prognostications that grip everyday experience, like stock market analysis and diet/nutrition advice. Maybe the problem with public climate change debate is that it’s too scientific, in the sense that scientists know the limitations of their knowledge and models, and are wary of “defrauding” the public by drawing inductive conclusions that aren’t directly confirmed by evidence. Or maybe there’s just no good way to integrate the best climate models with local environmental and economic knowledge … yet.

Well, so what? Isn’t tackling climate change still an intractable global political problem? Maybe not. The more that people understand about the impacts climate change will have on them personally, the more likely they are to personally take action to ameliorate climate change, even absent meaningful top-down climate change policy. And while global governance may be beyond the reach of most individuals, local and state programs are not so far removed from private participation. In her recent article, Localizing Climate Change Action, Myanna Dellinger examines several such “home-grown” programs, and concludes that they may be an important component of climate change mitigation. Minnesotans are probably most worried about climate change’s impact on snow storms, lake health, and crop yields, while Arizonans might worry more about drought and fragile desert ecosystems, and Floridians might worry about hurricanes and beach tourism. If all of these local groups are motivated by the same fundamental problem, their actions may be self-coordinating in effect, even if they are not coordinated by design.

Climate change

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