With Congress failing to enact climate legislation, the U.S. Environmental Protection Agency is proceeding to regulate greenhouse gases under the Clean Air Act. EPA’s proposed “Clean Power Plan” will regulate the largest source of greenhouse gases in the U.S. economy — the CO2 emitted by electric power generating plants. EPA plans to follow its power plant regulations with other sector-specific regulation of greenhouse gases.
Virtually all economists agree that even the best-designed regulatory approach is likely to be more costly and less effective than an economy-wide carbon price, as (then) EPA Administrator Lisa Jackson conceded in her testimony to the House Energy and Commerce Committee on Earth Day 2009. As EPA marches forward with its regulation, some conservatives and libertarians have begun to urge Congress to replace EPA’s complex sector-by-sector regulatory approach with an economy-wide carbon tax whose revenue could be used to reduce other taxes.
The graph below stacks up baseline emissions in 2005 and 2013 against emissions projected by CTC’s 7-sector model for 2030 under three scenarios: “business as usual (with no carbon price),” the EPA’s Clean Power Plan target of a 30% reduction in power-sector emissions from 2005, and the deeper reductions from the carbon tax proposed by Rep. Jim McDermott (D-WA). Take a close look at the green segments representing electricity generation, the only sector covered by EPA proposals to date.
You’ll find more details about our analysis and comparison of EPA’s proposed rule to Rep. McDermott’s proposal in our post, Next to Nothing for Climate in Obama Plan (6/2/14).
“The Politics and Economics of Obama’s New Climate Program” by CTC board member Robert Shapiro (7/2/13).
“Obama’s Power Plant Plan Won’t Work” by David Bailey and David Bookbinder (Politico, 7/16/13).