EPA, carbon, and the South

In a somewhat surprise ruling, the U.S. Supreme Court said that the EPA can regulate carbon emissions. The ruling addressed three questions:

• Do states have the right to sue the EPA to challenge its decision?

• Does the Clean Air Act give EPA the authority to regulate tailpipe emissions of greenhouse gases?

• Does EPA have the discretion not to regulate those emissions?

The Supreme Court ruling says that states indeed have the right to sue the EPA to enforce regulation, and that EPA has the authority to regulate greenhouse gases, effectively ending the government debate as to whether global climate change is real or can be scientifically proven to be caused by humans:

Because congress has ordered EPA to protect Massachusetts (among others) by prescribing applicable standards,ß7521(a)(1), and has given Massachusetts a concomitant procedural right to challenge the rejection of its rulemaking petition as arbitrary and capricious, ß7607(b)(1), petitioners' submissions as they pertain to Massachusetts have satisfied the most demanding standards of the adversarial process. EPA's steadfast refusal to regulate greenhouse gas emissions presents a risk of harm to Massachusetts that is both "actual" and "imminent," Lujan, 504 U. S., at 560, and there is a "substantial likelihood that the judicial relief requested" will prompt EPA to take steps to reduce that risk, Duke Power Co. v. Carolina Environmental Study Group, Inc., 438 U. S. 59, 79. Pp. 12-17.

[..]

The harms associated with climate change are serious and well recognized. The Government's own objective assessment of the relevant science and a strong consensus among qualified experts indicate that global warming threatens, inter alia, a precipitate rise in sea levels, severe and irreversible changes to natural ecosystems, a significant reduction in winter snowpack with direct and important economic consequences, and increases in the spread of disease and the ferocity of weather events.

[..]

Given EPA's failure to dispute the existence of a causal connection between man-made greenhouse gas emissions and global warming, its refusal to regulate such emissions, at a minimum, "contributes" to Massachusetts' injuries.

The ruling also settles any argument as to whether carbon emissions are "pollution". The Supreme Court says:

That definition- which includes "any air pollution agent . . . , including any physical, chemical, . . . substance . . . emitted into . . . the ambient air . . . ," ß7602(g)-embraces all airborne compounds of whatever stripe. Moreover, carbon dioxide and other greenhouse gases are undoubtedly "physical [and] chemical . . . substance[s]." Ibid.

As to the third question, the ruling says:

Under the Act's clear terms, EPA can avoid promulgating regulations only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do. It has refused to do so, offering instead a laundry list of reasons not to regulate, including the existence of voluntary Executive Branch programs providing a response to global warming and impairment of the President's ability to negotiate with developing nations to reduce emissions. These policy judgments have nothing to do with whether greenhouse gas emissions contribute to climate change and do not amount to a reasoned justification for declining to form a scientific judgment. Nor can EPA avoid its statutory obligation by noting the uncertainty surrounding various features of climate change and concluding that it would therefore be better not to regulate at this time. If the scientific uncertainty is so profound that it precludes EPA from making a reasoned judgment, it must say so.

While the lawsuit specifically deals with tailpipe emissions, it could have far reaching implications with regard to regulation of point source emissions from coal-fired power plants.

As part of FDR's New Deal Rural Electrification program, TVA energized and transformed the South. Unfortunately, they are still using New-Deal-era technology -- coal-fired power plants brought online in the 1950's -- to generate more than 60% of the power they deliver to nine million residents in seven Southern states.

Coincidentally (or not?), TVA and a trade group representing their distributors announced just last week a "shared ownership" plan that would give local utilities and other TVA customers an ownership stake in their power producing facilities.

Under the plan, TVA could finance expansion of their power generating capacity "off the books", using tax exempt financing their distributors such as local utility companies are eligible for. This would help contain TVA's debt, which is currently around $25 billion. Distributors would get credit for the power produced at the plants they invest in.

But what else might these power distributors and local utilities get in the deal?

TVA's coal-fired power plants are becoming a huge liability. Even though they have successfully fought off New Source Review challenges, there always seems to be another lawsuit. Eventually, one of them might prevail and TVA will be held accountable for all the pollution. Or, a more environmentally friendly administration might come in to office and force TVA to accelerate installation of expensive pollution controls. Then there are the growing concerns about other toxic releases such as mercury.

This latest Supreme Court ruling appears to make any or all of these scenarios more likely.

If the EPA does someday regulate CO2 emissions from coal-fired power plants, carbon sequestration will become a huge problem. Implementing carbon sequestration systems could cost TVA a fortune. In 2005, TVA coal-fired power plants emitted 105,000,000 tons of CO2. Cap-and-trade carbon credit offsets alone could cost hundreds of millions per year in additional operating costs.

So we wonder if the power distributor trade group working on the joint ownership proposal with TVA has considered all this. Would local residents want to be on the hook for all that liability by way of their local utility company? In one sense it doesn't really matter, though. Ratepayers throughout the TVA system are going to have to pay the piper sooner or later.