Cap-and-Trade Under the Clean Air Act? Rethinking Section 115

by Hannah Chang

As comprehensive climate legislation stagnates in Congress, the possibility of greenhouse gas (“GHG”) regulation under the Environmental Protection Agency’s (“EPA”) existing Clean Air Act (“the Act”) authority as the sole federal means of addressing climate change becomes increasingly likely.  Whether EPA has existing authority to implement a cap-and-trade program for GHGs, which many believe is the cornerstone of an effective and efficient approach to controlling emissions, has as yet no definitive answer.  The various sections of the Clean Air Act that could act as authority for such a program have their own legal ambiguities and practical limitations.[1] One largely overlooked section – § 115 on “International Air Pollution” – however, is potentially quite powerful in its implications for the establishment of cap-and-trade under the Clean Air Act.

Columbia Law School’s Center for Climate Change Law has issued a working paper, available here, that argues that EPA can exercise its § 115 authority now.  Upon a finding that pollution in the United States is causing or contributing to air pollution “which may reasonably be anticipated to endanger public health or welfare in a foreign country” and a reciprocity finding that the affected foreign country gives the U.S. “essentially the same rights with respect to the prevention or control of air pollution occurring in that country as is given that country” by the section, § 115 authorizes the EPA to order the states in which emissions are occurring to revise their state implementation plans (SIPs) to address the foreign endangerment.[2]

Section 115 would likely permit EPA to establish state GHG emissions “budgets” in issuing a call for states to revise their SIPs, and the existence of such a GHG cap would serve as an impetus for states to act together (as some already have) to implement a system that would permit trade of GHG allowances.  Section 115 offers promise because (1) its authority can be exercised relatively quickly given that the necessary endangerment and reciprocity findings can likely be made, (2) it stands on strong legal ground insofar as states have clear authority to participate in allowance trading (and would be strongly incentivized to trade through the establishment of a cap), (3) it devolves responsibility to the states, which should give individual states political breathing room in deciding how to comply with the cap, and (4) it offers great flexibility, which would encourage the most efficient means of complying with the cap.

So why has § 115 so rarely been contemplated as a viable approach to GHG mitigation?  Because of a misplaced assumption that the pollutants regulated under § 115 must be “criteria pollutants,” or pollutants for which the EPA has established National Ambient Air Quality Standards (NAAQS), an avenue that is widely viewed as an overly burdensome approach to GHG mitigation.  The Center’s paper examines the statutory language and legislative history of § 115 to argue that, contrary to the conventional view, pollutants regulated by § 115 need not be criteria pollutants.

Federal legislation enacting a cap-and-trade program for GHG emissions is undoubtedly the ideal approach, and the paper does not make the argument that determining GHG emissions caps for each state and then permitting states to choose how to meet that cap is by any means the most efficient or effective approach to GHG mitigation.  In the absence of a comprehensive federal scheme, however, and in the face of a political climate that seems increasingly resistant to a comprehensive cap-and-trade regime, the paper encourages the consideration that EPA has more in its Clean Air Act arsenal than it currently supposes.

[1] The three Clean Air Act sections that have been most frequently cited to provide authority for a cap-and-trade program are § 111 (New Source Performance Standards), Title VI (addressing stratospheric ozone protection), and the National Ambient Air Quality Standards (NAAQS) implemented through the states.  For a discussion of the various avenues and an evaluation of legality, effectiveness, efficiency, and fairness under each avenue, see Inimai M. Chettiar & Jason A.  Schwartz, The Road Ahead: EPA’s Options and Obligations for Regulating Greenhouse Gases (Inst. for Policy Integrity, N.Y. Univ. School of Law, April 2009).

[2] Clean Air Act, 42 U.S.C. § 7415 (2010).

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