The Problem with Backing into Policy

Senior Fellow
Robert W. Hahn

President Obama promised to get serious about climate change, and with the signals coming from the Environmental Protection Agency, it looks like he means it. That's both good news and bad.


On the plus side, some regulation of greenhouse gas emissions is long overdue. But the Clean Air Act is a dubious means to a desirable end: Congress, after all, never envisioned that the law would be used this way.

Think of this as Act 1, Scene 1 in a drama that will stretch across decades.


The best guess now is that the agency will formally rule that carbon dioxide (and perhaps other greenhouse gases) endanger public health and welfare. And this finding will be used to place limits on carbon dioxide emissions.


Electric utilities will almost certainly be the first target, but the regulations could also affect petrochemicals, agriculture and autos. Virtually any policy that limits emissions would lead to price increases in the regulated sectors. But there's every reason to believe that Lawrence Summers, the head of the National Economic Council, would not allow the E.P.A. to impose major costs on industries during the economic crisis.


Think of this as Act 1, Scene 1 in a drama that will stretch across decades. The next big question is whether President Obama will defer to the Democratically controlled Congress' wish to assert control over climate change policy. And the best guess here is that the administration will try to have it both ways, outlining the key dimensions of the policy but seeking the blessing (and political cover) of Congress to make very expensive changes in the way the American economy uses fossil fuels.


The final form of the legislation--in particular, who foots the bill--is up for grabs. But it will almost certainly take the form of a market-based "cap-and-trade" regime in which carbon emitters are offered a variety of ways to reduce the costs of compliance. And it is almost as certain that the process of building a legislative majority will involve a helping hand to powerful interest groups ranging from ethanol makers to coal companies to wind power enthusiasts.


However the United States climate change policy evolves, it won't make much difference if other latecomers can't be convinced to join the party. American efforts at containing climate change will be futile unless China and India--not to mention Brazil and Indonesia--make the investment needed to decouple economic growth from carbon emissions growth. And that isn't likely to happen unless rich countries make it worth their while in financial terms by subsidizing carbon-sparing technologies or investing in research and development that drastically reduces the cost of such technologies.


All that said, this first act in the very long play is an important one. For an effective global policy on climate change is simply not possible without leadership from the United States.


Robert W. Hahn is a senior fellow at AEI.

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