January 2012

Climate policymaking in our Nation’s capital often resembles the heavy-handed dialogue of old-time mobster films.

“Are you gonna come along quietly, or do I have let the California Air Resources Board (CARB) muss ya up?” That was pretty much the line White House Environment Czarina Carol Browner took to obtain the auto industry’s support for the joint EPA/National Highway Traffic Safety Administration (NTSHA) greenhouse gas (GHG) emission/fuel economy standards rule. EPA is now in a position both to determine the stringency of fuel economy standards for the auto industry and to set climate policy for the nation. Yet the Clean Air Act provides no authority to regulate fuel economy and says nothing about greenhouse gases or global climate change. ”Badges? We don’t need no stinking badges.”  

Modus Operandi: Threaten in Order to Remove the Threat — for a Price

Here’s how the regulatory mugging went down. 

In February 2009, EPA Administrator Lisa Jackson commenced a rulemaking to reconsider Bush EPA Administrator Stephen Johnson’s denial of California’s request for a waiver to establish its own greenhouse gas emission standards program. Because the waiver would also allow other states to adopt the California program, because GHG emission standards are mainly fuel economy standards by another name, and because automakers would have to reshuffle the mix of vehicles delivered for sale in each “California” state to achieve the same average fuel economy in those states, Jackson’s proceeding threatened to subject automakers to inefficient, consumer-thwarting, regulatory patchwork.

In May 2009, Czarina Browner conducted secret negotiations with automakers, CARB Chairman Mary Nichols, and major environmental groups. Browner required participants to take a vow of silence and forbade anyone to take notes, violating the Presidential Records Act. The closed-door negotiations produced an “historic agreement” whereby automakers would support the EPA/NHTSA GHG/fuel economy standards rule and California and other states would deem compliance with the federal standards as compliance with their own.

In addition, observes Rep. Darrel Issa (R-Calif.), at the same time the Browner-led negotiations were taking place, ”the government was also engaged in bailout talks with General Motors (GM) and Chrysler,” resulting in “an ownership stake for the federal government of 61% of GM and 8% of Chrysler, respectively.” Whether Browner literally made the auto industry an offer it could not refuse, with the sweetener of financial assistance also contingent on the industry’s embrace of GHG regulation, we may never know.

This much is clear. By granting California’s request for a waiver, EPA created the threat of a regulatory patchwork, enabling the White  House to offer ”protection” in the form of the joint GHG/fuel economy standards rule. The protection “fee” was the auto industry’s unquestioning support for the joint rule and its prerequisite, EPA’s endangerment rule.

Thus, the Auto Alliance became the key industry lobby opposing Sen. Lisa Murkowski’s resolution to overturn EPA’s endangerment rule. The Alliance warned that if the endangerment finding were overturned, the “historic agreement” would unravel, confronting automakers with “the alarming possibility of having to comply with multiple sets of conflicting fuel economy standards.” 

That is correct, but only because EPA Administrator Jackson, reversing her predecessor’s decision, granted California a waiver to establish GHG emission standards for new motor vehicles. An obvious solution would be to overturn the waiver. After all, the Energy Policy and Conservation Act clearly prohibits states from adopting laws or regulations ”related to fuel economy,” and the California motor vehicle emissions program is basically a de facto fuel economy program. The waiver effectively repeals federal law, violating the separation of powers. Not that you’ll ever hear about that from Government Motors. Mum’s da woid.

Mirage of Regulatory Certainty

The auto industry is not the only target of the greenhouse protection racket. For years, the greenhouse gang has been saying that only cap-and-trade can end the intolerable ”regulatory uncertainty” facing the electric power sector, energy-intensive manufacture, and other CO2 emitters. But who created the uncertainty in first place if not the self-same advocates of cap-and-trade? If they were serious about relieving uncertainty, they would disavow the regulatory schemes for which they have been campaigning.

Businesses lobbying for cap-and-trade in the name of certainty should read the fine print. The Waxman-Markey and Kerry-Boxer bills, for example, have multiple escalater clauses setting the stage for dramatic increases in regulatory stringency well beyond the bills’ explicit emission reduction targets.  Similarly, the bills’ “findings” presenting the “scientific” rationale for cap-and-trade are not mere rhetorical fluff but precedents for litigation targeting emission sources considerably smaller than those explicitly identified as “covered entities.” Enact such legislation, and the only certainty is that regulatory burdens will grow unpredictably.

Too Clever by Half

Last but not least, cap-and-taxers sell their policy as protection from litigation-driven greenhouse gas regulation under the Clean Air Act.  The sales pitch goes something like this: “Pretty nice company you got deah, shame if sumpin’ bad waz to happen to it. Everybody needs protection. You need protection. It’s called Kerry-Lieberman.” Note the familiar pattern. The gang pushing cap-and-trade as protection from EPA are the same folks who sued EPA to regulate greenhouse gases and who vilified Sen. Murkowski and others for attempting to stop EPA.

This is all too clever by half. If cap-and-trade dies in the 111th Congress, which seems increasingly likely, the Obama administration and its allies on the Hill will take sole ownership of the compliance costs, job and GDP losses, and “absurd results“ arising from EPA regulation of greenhouse gases under the Clean Air Act. 

Democratic leaders may not recognize it yet, but they have painted themselves into a corner. They have become the Party of Endangerment — the party endangering the U.S. economy by championing the endangerment rule, with all its cascading regulatory effects.