U.S. Takes a Gamble With Test of Carbon Caps on Car Makers
By STEPHEN POWER
The Obama administration is preparing to test whether capping greenhouse gas emissions will push the economy into higher gear, or deeper into a rut. The likely subject of the experiment is the ailing auto industry.
Later this month, Environmental Protection Agency Administrator Lisa Jackson is expected to declare that carbon dioxide emissions from automobiles endanger health and welfare because of their impact on the climate.
That finding will be a trigger for the EPA to regulate greenhouse-gas emissions under the 1970 Clean Air Act -- independent of any congressional action on broader climate-change measures. A senior administration official familiar with the EPA's plans says the agency will likely confine its rule-making efforts on greenhouse gases this year to autos.
Business groups are sounding the alarm over the prospect of expanded EPA power. The U.S. Chamber of Commerce has warned that more than one million businesses involved in manufacturing, operating buildings and services, and farming could eventually become subject to costly new emissions regulations.
Ms. Jackson, in a recent speech, said it is "a myth...that right now we are at this horrible fork in the road...and EPA will regulate cows, Dunkin' Donuts, Pizza Huts, your lawnmower and baby bottles."
Still, what the EPA wants to do with the auto industry is ambitious -- and risky given the industry's weakened condition amid the worst sales slump since the Great Depression. Chrysler LLC has fewer than 30 days to conclude a deal with its creditors, unions and prospective partner Fiat SpA or it could be forced to seek bankruptcy protection. General Motors Corp. has fewer than 60 days to satisfy the Obama administration that it can be viable without a trip through bankruptcy court.
The EPA is trying to craft new federal emissions standards that would match California's still-to-be-implemented state-level greenhouse-gas standards for vehicles and federal automobile fuel economy regulations now being developed by the Transportation Department. Figuring out how to do this won't be easy, or cheap.
The Obama administration inherited a congressional mandate for auto makers to boost the average fuel economy of their vehicle fleets to at least 35 miles per gallon by 2020, a 40% increase from the roughly 25 mpg standard for the current fleet. California estimates its standards would require auto makers to achieve 35 mpg by 2017. And unlike the federal government, which gives auto makers compliance credits for churning out "flex-fuel" vehicles capable of running on high levels of ethanol, California requires auto makers to prove motorists are actually filling up on those high-level blends in order to claim credit.
Just meeting the federal standards will require huge investments by auto makers. Last summer, the Transportation Department estimated its proposal to require auto makers to achieve 31.6 mpg by 2015 would cost them $46.7 billion, a sum the agency said would make it among the most expensive rule makings in U.S. history.
How the EPA handles automotive greenhouse gases could influence the broader debate in Congress over climate change.
Some Democrats are betting that fears of the EPA's growing regulatory reach will galvanize Congress to pass Mr. Obama's preferred approach to tackling climate change: legislation that set an overall limit on greenhouse-gas emissions and allows companies to buy and sell the right to pollute within that limit.
EPA regulation "wasn't a threat that existed during the Bush administration," says Rep. Edward Markey (D., Mass.). Now that the EPA is poised to act, he says, "I think that will become a realization that drives the political process."
A less welcome scenario for businesses is that environmentalists and ordinary citizens will use the EPA's endangerment finding to go to court to force the administration to widen the scope of its rule making.
Under one portion of the Clean Air Act, facilities that could be major sources of air pollution can be built or significantly modified only if they are equipped with "the best available control technology." The law generally applies to power plants, refineries, steel mills or other facilities if they emit at least 100 tons per year of any regulated air pollutant.
But the law also covers "any building, structure, facility or installation" that emits at least 250 tons per year of any regulated air pollutant -- a threshold low enough to cover roughly one million midsize to large commercial-sector sources, including restaurants, hospitals, schools and office buildings, based on estimates by the U.S. Chamber of Commerce.
"There may be some fringe thinkers out there, but not one of the major environmental groups has any desire" to go after facilities that emit less than 10,000 tons of CO2 a year, says David Bookbinder, a lawyer for the Sierra Club.
Opponents of EPA-crafted regulation say those assurances aren't good enough. "Our neighbors would challenge Costco [under the Clean Air Act] if they had the chance," says Roger Martella, who was the EPA's general counsel under President George W. Bush and now represents utilities, manufacturers, and other groups worried about EPA regulation. "The Sierra Club can't stop them."
Mr. Obama declared in his inaugural address that "the stale political arguments that have consumed us for so long no longer apply." The response to the EPA's first steps toward attacking climate change will test whether he spoke too soon.
Write to Stephen Power at stephen.power@wsj.com
By STEPHEN POWER
The Obama administration is preparing to test whether capping greenhouse gas emissions will push the economy into higher gear, or deeper into a rut. The likely subject of the experiment is the ailing auto industry.
Later this month, Environmental Protection Agency Administrator Lisa Jackson is expected to declare that carbon dioxide emissions from automobiles endanger health and welfare because of their impact on the climate.
That finding will be a trigger for the EPA to regulate greenhouse-gas emissions under the 1970 Clean Air Act -- independent of any congressional action on broader climate-change measures. A senior administration official familiar with the EPA's plans says the agency will likely confine its rule-making efforts on greenhouse gases this year to autos.
Business groups are sounding the alarm over the prospect of expanded EPA power. The U.S. Chamber of Commerce has warned that more than one million businesses involved in manufacturing, operating buildings and services, and farming could eventually become subject to costly new emissions regulations.
Ms. Jackson, in a recent speech, said it is "a myth...that right now we are at this horrible fork in the road...and EPA will regulate cows, Dunkin' Donuts, Pizza Huts, your lawnmower and baby bottles."
Still, what the EPA wants to do with the auto industry is ambitious -- and risky given the industry's weakened condition amid the worst sales slump since the Great Depression. Chrysler LLC has fewer than 30 days to conclude a deal with its creditors, unions and prospective partner Fiat SpA or it could be forced to seek bankruptcy protection. General Motors Corp. has fewer than 60 days to satisfy the Obama administration that it can be viable without a trip through bankruptcy court.
The EPA is trying to craft new federal emissions standards that would match California's still-to-be-implemented state-level greenhouse-gas standards for vehicles and federal automobile fuel economy regulations now being developed by the Transportation Department. Figuring out how to do this won't be easy, or cheap.
The Obama administration inherited a congressional mandate for auto makers to boost the average fuel economy of their vehicle fleets to at least 35 miles per gallon by 2020, a 40% increase from the roughly 25 mpg standard for the current fleet. California estimates its standards would require auto makers to achieve 35 mpg by 2017. And unlike the federal government, which gives auto makers compliance credits for churning out "flex-fuel" vehicles capable of running on high levels of ethanol, California requires auto makers to prove motorists are actually filling up on those high-level blends in order to claim credit.
Just meeting the federal standards will require huge investments by auto makers. Last summer, the Transportation Department estimated its proposal to require auto makers to achieve 31.6 mpg by 2015 would cost them $46.7 billion, a sum the agency said would make it among the most expensive rule makings in U.S. history.
How the EPA handles automotive greenhouse gases could influence the broader debate in Congress over climate change.
Some Democrats are betting that fears of the EPA's growing regulatory reach will galvanize Congress to pass Mr. Obama's preferred approach to tackling climate change: legislation that set an overall limit on greenhouse-gas emissions and allows companies to buy and sell the right to pollute within that limit.
EPA regulation "wasn't a threat that existed during the Bush administration," says Rep. Edward Markey (D., Mass.). Now that the EPA is poised to act, he says, "I think that will become a realization that drives the political process."
A less welcome scenario for businesses is that environmentalists and ordinary citizens will use the EPA's endangerment finding to go to court to force the administration to widen the scope of its rule making.
Under one portion of the Clean Air Act, facilities that could be major sources of air pollution can be built or significantly modified only if they are equipped with "the best available control technology." The law generally applies to power plants, refineries, steel mills or other facilities if they emit at least 100 tons per year of any regulated air pollutant.
But the law also covers "any building, structure, facility or installation" that emits at least 250 tons per year of any regulated air pollutant -- a threshold low enough to cover roughly one million midsize to large commercial-sector sources, including restaurants, hospitals, schools and office buildings, based on estimates by the U.S. Chamber of Commerce.
"There may be some fringe thinkers out there, but not one of the major environmental groups has any desire" to go after facilities that emit less than 10,000 tons of CO2 a year, says David Bookbinder, a lawyer for the Sierra Club.
Opponents of EPA-crafted regulation say those assurances aren't good enough. "Our neighbors would challenge Costco [under the Clean Air Act] if they had the chance," says Roger Martella, who was the EPA's general counsel under President George W. Bush and now represents utilities, manufacturers, and other groups worried about EPA regulation. "The Sierra Club can't stop them."
Mr. Obama declared in his inaugural address that "the stale political arguments that have consumed us for so long no longer apply." The response to the EPA's first steps toward attacking climate change will test whether he spoke too soon.
Write to Stephen Power at stephen.power@wsj.com
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