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Cap-and-trade is GOP's next best step on environmental regulation

Cap-and-trade is GOP's next best step on environmental regulation
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On Tuesday Scott PruittEdward (Scott) Scott PruittOklahoma AG resigns following news of divorce, alleged affair Court sets in motion EPA ban on pesticide linked to developmental issues Scientific integrity, or more hot air? MORE, head of the Environmental Protection Agency finally made clear what we all knew was coming: The EPA will repeal the Clean Power Plan.

The plan, focused on decreasing greenhouse gas emissions from existing power plants, the largest source of such emissions in the country, was projected to cut carbon dioxide emissions 32 percent from 2005 levels by 2030.  While repeal of the Clean Power Plan is frustrating to the large majority of Americans who now favor climate change regulation, it also presents an opportunity for conservatives to implement efficient climate change regulation and prove they are not held hostage to deregulatory special interests.

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Conservatives pounced on the Clean Power Plan as a costly response to climate change that would impede economic growth and job creation. They also complained that the plan was a classic example of an administrative agency overreaching the powers delegated to it by Congress in a blatant power grab.  We could argue about these issues all day and, indeed, we have. But now that the plan is being repealed, it is time to consider new regulatory fixes.

Let’s get one thing straight first. The idea of not regulating greenhouse gases — of leaving them to the free market — is a non-starter. Climate change has been called the world’s biggest market failure and the free market won’t work to decrease greenhouse gases the way that people want.

Free markets marry our desires, reflected by our willingness to pay for things, with what society produces. However there are many ways that markets fail to marry people’s preferences to how resources are used; common ownership of the air, imperfect information, strategic behavior and many other reasons keep the market from working to decrease greenhouse gases in the way most people want.

Market failure is not a new idea, nor is it controversial. According to the Yale Program on Climate Change Communication, 7 in 10 Americans — including majorities in every state  — support honoring our international commitment to decrease greenhouse gases. The market will not adequately respond to these desires. To decrease emissions in accordance with the desires of the American people we are going to need a regulatory response.

The Clean Air Act, signed into law by Richard Nixon in 1970, represents a first effort by Congress to regulate air pollution. While the act has been amended to respond to problems with its early implementation, there are now a number of second-generation environmental tools that could be used to regulate greenhouse gases in a relatively low-cost manner without agency overreaching. These include cap-and-trade regulation and carbon taxes.

Each of these tools relies on the market by placing a cost on the price of producing carbon. This cost then incentivizes industry to find the most cost-effective ways to decrease emissions. Very little “nanny state,” much less administrative cost, and relatively cheap compliance are the result.  

The idea of cap-and-trade was championed by such conservatives as Ronald Reagan and George H.W. Bush. Such a program first places a cap on the total amount of emissions. The government then creates emissions allowances (for example, a permit to emit one ton of carbon dioxide) that can be traded.

Companies that can cheaply decrease emissions will do so and sell their allowances to those who can’t. Such a scheme leaves it to industry to identify the most cost-effective ways of decreasing pollution instead of relying on the “nanny state” to specifically tell industry what to do. By passing a cap-and-trade law rather than relying on the Clean Air Act, Congress can also specifically control how the EPA regulates greenhouse gases and thus avoid overreach.   

Cap and trade has been used very successfully to decrease Sulphur dioxide pollution in the U.S. and is even being used to control greenhouse gases. As reported recently by The New York Times, a consortium of northeastern and mid-Atlantic states has adopted such a program to control greenhouse gases with great success. On top of a 40 percent decrease in emissions, electricity prices in the consortium states have fallen by 3.4 percent. The program is also estimated to have produced $6 billion in additional public health benefits. Ideological objections must give way to proven results.

The planned repeal of the Clean Power Plan has opened the door for a conservative Congress and president to adopt this market-driven regulation — a regulatory scheme that reflects conservative ideals while responding to the desires of the vast majority of the American population. Failure to do so will reflect just how beholden they are to special interests rather than the American people.

Alex Geisinger is a professor of law at Drexel University Thomas R. Kline School of Law. He concentrates on the role of legal theory in the development of international law, environmental law and criminal law.