Megan Herzog has done a great job of explaining the background of the rules and summarizing the proposal in her blog posts.  I just wanted to add a quick note about how EPA has structured its rules in light of possible legal challenges.  The fundamental issue facing EPA is how to define the “best system” for reducing carbon emissions.  Is it limited to technological upgrades at individual emitters?  Or can it be broader, and if so, how broad?  Industry is sure to argue that EPA can only set standards for individual plants that emit carbon, nothing more.

EPA responds to this argument in two ways.  First, as Megan notes, states can use measures drawn from four “building blocks” — reductions at individual emitters, trading with other emitters, use of renewable energy, and energy efficiency.  The first block corresponds to industry’s interpretation of the law.  The second block …

The regulatory process has become more opaque and less accountable. We need to fix that.

Every year, thousands of law students take a course in administrative law.  It’s a great course, and we wish even more students took it.  But there’s a risk that students may come away with a vision of the regulatory process that is increasingly disconnected with reality.  Worse, the leading judicial opinions on the subject suggest that judges may suffer from a similar disconnect.

The Administrative Procedure Act is based on the premise that Congress delegates the power to address a problem to an agency, which then applies the statute to formulate a regulation.  Policy is driven by the statute along with the views of the agency head, who is appointed by the President and confirmed by the Senate.  But the realities are often different.  Policy is often driven, not so …

Has the U.S. "exported" its carbon emissions to China by relying on China to manufacture so many of our goods?  There seems to be growing support for the idea that carbon emissions should be tied to consumption of goods rather than their manufacture, as the NY Times reported recently.  There is a grain of truth to the idea.  But consumer responsibility should be considered secondary.  The primary responsibility rests with producers.

Most of the debate has been about climate change.  But it may be easier to think through the issue in a less contentious context.  Consider the problem of water pollution in the Mississippi River, which results in the infamous dead zone in the Gulf of Mexico.  Agricultural runoff in the Midwest is a big part of the problem.  A significant portion of the U.S. corn and soybean crops are exported to Asia.

Does this …

I’ve spent a lot of time and energy talking about the need to adapt to climate change, but I’ve also become increasingly uneasy about “adaptation” as a way to think about the situation.  One of the things I don’t like about the term “adaptation” is that it suggests that we actually can, at some expense, restore ourselves to the same position we would have been in without climate change.  For any given amount of climate change, we can do things that decrease the resulting harms (at a cost), but we can’t eliminate those harms.  Adapting to climate change is like “adapting” to a serious chronic disease — you can get by, with luck, but it’s still not like being healthy.

But there’s also an important conceptual issue.  The idea of adaptation assumes that the world will go along more or less as …

As it turns out, many of the same people who deny that climate change is a problem also deny that government default would be a problem.  No doubt there are several reasons: the fact that Barack Obama is on the opposite side of both issues; the general impermeability of ideologues to facts or expert opinion; a general suspicion of elite views.  But I’d like to suggest that there is also a deeper belief about the invulnerability of systems to outside shocks, either on the view that the system is very loosely linked or has a very strong tendency to return to equilibrium. These are actually a bit contradictory since strong corrective forces imply tight linkage, but most people don’t notice that.

For example, you might think that changing one atmospheric gas wouldn’t really have much impact on the world or that counteracting forces like …

Reposted from Legal Planet.

A couple of weeks ago, a major paper on the economics of government deficits turned out to have huge flaws. Matt Kahn and Jonathan Zasloff have already had something to say about this, but I’d like to add some thoughts about the implications for environmental issues.“Interesting,” you say, “But what does that have to do with the  environment?”  

I see two big lessons.  The first lesson is about the danger of overreacting to a dramatic research finding, especially when you really want to believe it because it confirms what you thought all along.  The second lesson is about how little economists know about the functioning of the economic system as a whole, as compared with their understanding of how individual pieces of the economy work. This is really important for large-scale issues like climate change.  I’d suggest use of the …

Reposted from Legal Planet, by permisison.

There are a lot of things to disagree about in terms of energy policy.  One thing that ought to be common ground, as discussed in a Washington Post column, is increased research in energy R&D.  As this chart shows, federal support for energy R&D is smaller than it was under Ronald Reagan:

The economic argument for supporting R&D is simple.  Private firms don’t have enough of an incentive to engage in basic research because intellectual property law doesn’t allow them to capture the full benefits of the resource. For that reason, government support for the research is necessary.  Moreover, really new ideas have a high risk factor that may make them unattractive to private investors (a problem addressed by the ARPA-E program.)

For this reason, it’s good news that the President’s proposed budget includes substantial increases for …

Cross-posted from Legal Planet.

Cost-benefit analysis has become a ubiquitous part of regulation, enforced by the Office of Management and Budget. A weak cost-benefit analysis means that the regulation gets kicked back to the agency. Yet there is no statute that provides for this; it’s entirely a matter of Presidential dictate. And reliance on cost-benefit analysis often flies in the face of specific directions from Congress about how to write regulations. There are a few exceptions, such as regulations involving pesticides, bans on toxic substances, and thermal water pollution, where Congress called for EPA to balance costs and benefits equally. But almost all environmental laws direct agencies to use some standard other than cost-benefit analysis. The statutes generally place a greater weight on environmental quality and public health than on cost.

For example, it’s fairly obvious that Congress did not contemplate much of a role …