This essay argues that U.S. environmental policy should operate in accordance with five major components of rationality: cost-benefit analysis; cost minimization; flexible market-based instruments; constraints on grandfathering; and the sensible allocation of decision-making authority between the federal government and the states. This past Term, the Supreme Court decided two significant cases, which together should be seen as producing a move toward rationality in environmental policy.
The Applicability of Section 111(d) of the Clean Air Act to Greenhouse Gases
The United States Supreme Court determined that greenhouse gases (GHGs) were an “air pollutant” under the Clean Air Act in its ruling on Massachusetts v. EPA. The Environmental Protection Agency (EPA) has since taken steps to regulate GHGs under a rarely utilized provision of the Clean Air Act, section 111(d). Despite the text printed in the U.S. Code, the true text of section 111(d) is in doubt. This is because of a small but potentially significant legislating error that occurred during the creation of the 1990 Clean Air Act Amendments, when the Senate and House of Representatives made different revisions to section 111(d), both of which were passed by both houses of Congress and signed by the President. This paper analyzes whether the conflicting amendments to section 111(d) will prove to be a problem or an opportunity for EPA in its efforts to regulate GHGs.
This is a student working paper, and it does not necessarily represent the views of the Institute for Policy Integrity.
The topic of this paper is the assumed growth of solar photovoltaic (PV) in current energy models, with a focus on information from Annual Energy Outlook (AEO) of the U.S. Energy Information Administration (EIA). EIA resolves the difficulty of modeling solar energy into the future by assuming its current growth will not continue. However, EIA’s assumptions on the future costs of solar PV are highly pessimistic, and its methodology would appear to bias its “Reference Case” projections toward lower growth of solar energy. Sure enough, past AEOs have systematically underestimated the future growth of solar PV. Energy modelers therefore may need to adjust the AEO forecast in order to reflect a most likely baseline trajectory for solar PV.
In Whitman v. American Trucking, the Supreme Court interpreted the Clean Air Act to require the EPA to set the National Ambient Air Quality Standards (NAAQS), without considering costs. Instead, the agency must rely exclusively on health-related criteria. The authors argue that such health-based standards are problematic because there is no coherent way to set the permissible level of pollution based on health considerations alone and, ironically, the NAAQS have generally been set at levels that are inefficiently lax from an economic perspective. The authors urge a reinterpretation of the American Trucking case that would allow the EPA to consider costs-benefit analysis when it would lead to more stringent standards, as it currently does for most regulated pollutants.
Costs of carbon emissions are being underestimated, but current estimates are still valuable for setting mitigation policy, say Richard L. Revesz, Peter H. Howard, Kenneth Arrow, Lawrence H. Goulder, Robert E. Kopp, Michael A. Livermore, Michael Oppenheimer, and Thomas Sterner in Nature.
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