October 05, 2009

Boxer-Kerry: Measures to Address Error and Illegality

This post is the fourth in a series from CPR Member Scholars examining different aspects of the Boxer-Kerry bill on climate change, which was released September 30

The Boxer-Kerry bill released on September 30, 2009 is yet another massive piece of proposed legislation. And it is likely to get even larger as details are added regarding distribution of pollution allowances, and as other gaps and shortcomings are addressed. Its basic architecture and enforcement provisions, however, give us a good feel for the bill’s basic functioning. It retains some of the best elements of the Waxman-Markey bill passed by the House and improves on others, but it leaves unresolved some fundamental choices that could lead to implementation uncertainties down the road. In particular, this analysis will focus first on error risks, especially on the extent to which the bill allows for regulatory agencies to fix mechanisms in the bill that fail to perform, or adjust for assumptions that turn out to be wrong. This analysis will then look at federalism and enforcement provisions that are among the mechanisms that can keep an enacted climate bill on track and also help address shortcomings in the law’s accomplishments. 

A pervasive challenge faced in a bill of this magnitude is the risk that it will quickly become derailed by the sheer weight of the demands it places on the federal regulatory agencies. Especially problematic in any complex and large legislative scheme are intertwined regulatory obligations that create a risk of systemic collapse if a major regulatory task goes undone or is done but then challenged in court and delayed or derailed. On the other hand, a bill with this sort of ambition that didn’t make specific assignments to regulatory agencies would be at great risk of going nowhere. 

Given the press of climate challenges, this bill seeks to avoid derailment due to agency inattention by specifying many tasks, often with deadlines. Mindful of the risk that some legislative judgments about the design of a carbon cap-and-trade market will be based on assumptions that turn out to be wrong or mechanisms that prove dysfunctional, the bill gives the relevant regulatory agencies the authority to correct such errors by issuing notice of a proposed rulemaking, taking comments on the proposal, and then issuing a new regulation.  For example, the bill takes this approach with the list of permitted categories of offset projects. Similarly, organizations and people outside the agency can petition for corrective actions or in other instances seek resolution of some narrower fact-related disputes, such as whether a particular gas qualifies as a “greenhouse gas.” In addition, agencies (or the President, as sometimes specified), also will need to adjust actions when, for example, a particular supposedly beneficial activity generating valuable “offset” credits turns out to be illusory or undone by later actions and hence, in the terms of the bill, subject to a “reversal.”  Furthermore, numerous studies and reports are due at regular intervals based on, among other things, cutting-edge assessment of science, markets, legal efficacy, and actions in other nations. 

The net result of these many implementation steps and corrective mechanisms is an avalanche of obligations. Major error can probably be checked, but a large question is whether these many interrelated tasks will lead to implementation delays. Corrective actions, if they occur, will likely be taken many years into the future as agencies struggle just to finish the first waves of statutorily mandated actions. The bill could be improved if every mandated action were carefully linked with language specifying what is to happen in the face of inaction or delay. Similarly, the bill would be improved if it used more default provisions that call for action but also set a default outcome or action if mandated agency action does not occur. In short, corrective procedures and mechanisms are essential, but they often could be clarified and recast to avoid statutory derailments.

Boxer-Kerry already addresses some of these delay and derailment risks in several important ways, one of which is an important improvement from the Waxman-Markey bill. Both bills contain language preserving state roles even in the face of a new federal climate law, but Boxer-Kerry does so a bit more comprehensively, and in a way that is central and more helpful to climate change progress. Despite the substantial risk of delay in federal implementation of the cap-and-trade market, the House bill sets a firm date for the federal climate bill to preempt already existing state and regional cap-and-trade programs. This creates a risk that the federal regime will be delayed, but the state and regional schemes would still be barred on a date-certain by one of the few self-executing provisions not requiring any antecedent agency act. The Boxer-Kerry bill takes that risk into account in Section 861, allowing state and regional programs to remain in effect until nine months after the first auction of greenhouse gas allowances. Since many major emitters would prefer a single federal regime to diverse state and regional approaches, leaving state programs in place until the federal regime is operational avoids a regulatory gap and also may nudge emitters to work to get the federal scheme up and running. However, once the federal program is operational, then state and regional cap-and-trade schemes are preempted for five years.

Boxer-Kerry, like Waxman-Markey, also retains an important role for states by making the time-limited preemption explicitly targeted only to cap-and-trade regimes, allowing states and political subdivisions latitude to control greenhouse gas emissions by a wide array of other strategies. The language used is meant to make abundantly clear that numerous sorts of specified current state greenhouse gas control strategies other than cap-and-trade regimes are allowed, but that the specified list is not exclusive. This language is important and valuable, reducing the risk of regulatory gaps and increasing the odds that states and local governments will retain latitude to innovate and push for progress even if federal progress proves slow.

A critically important failure risk is that the federal law could prove too lax, but that the federal legislative and regulatory venues would be gridlocked and hence unable to set new, lower emission caps or take other actions to lower emission levels. If this highly probable risk were to become reality, states might once again want to reassume the climate change leadership role they exhibited over the past decade and take actions to reduce emissions. Indeed, even without proof that a federal cap is unduly lax, states might want to take additional or continued steps to reduce pollution either due to climate risks or possible harms of activities or pollutants emitted along with greenhouse gases. (This is often referred to as the “co-pollutant” issue.) Section 124, especially in conjunction with Section 861, preserves the ability of states and other political subdivisions to take other regulatory actions, including “requir[ing] the surrender to the State or a political subdivision thereof of emission allowances or offset credits,” or requiring use of such allowances or credits “as a means of demonstrating compliance with” state or other subdivision laws. These are critically important provisions because they preserve states’ ability to require lower emissions than federally mandated and also to prevent polluters from simply turning and selling those allowances or credits outside the jurisdiction. These provisions thus provide a means to address the “leakage” problem where emissions controlled might otherwise just move elsewhere.

Similarly, missing from Boxer-Kerry are provisions in Waxman-Markey barring the federal EPA from taking actions related to greenhouse gases under existing Clean Air Act authority. Addressing greenhouse gas emissions under existing Clean Air Act authority could be difficult under some provisions, and perhaps not even desirable if better options are provided by a new federal climate bill. However, by retaining that EPA power, especially authority to set technology-based emissions limitations on the largest pollution sources, the government retains the authority to take action to supplement a cap-and-trade scheme if that proves necessary. In reality, even the mere threat of such supplemental action could nudge polluters into supporting implementation of the cap-and-trade regime, because they’d prefer the relative certainty of the cap-and-trade mechanism to the uncertainty of new regulations from EPA.

Perhaps the most problematic gap in the Boxer-Kerry bill is the absence of two important, broad, cross-cutting provisions. First, although the Clean Air Act amendments in the Boxer-Kerry bill retain state roles with the new “savings clause” provisions just discussed, it is less clear if state supplemental roles are meant to be preserved under all of the bill’s provisions. A broad, cross-cutting savings clause applicable to the whole bill and matching opening language praising the value of current and future supplemental state actions would help clarify the bill and deter future preemption litigation seeking to block state actions. Given the absence of preemptive language and the strong savings clause provisions in the bill, such preemption claims would be weak, but greater clarity would nevertheless be a valuable addition.

A second important but missing element in the Boxer-Kerry bill is a citizen suit provision authorizing citizens to sue regulators, polluters, or other players in the cap-and-trade market for violations of the law. Much of this bill amends the Clean Air Act, but other provisions are new or link to other laws. The Clean Air Act’s citizen suit provision thus would remain applicable. Federal government illegality will likely remain checkable through the Administrative Procedure Act or, for many actions, be enforceable through the Clean Air Act. Better still, however, would be a broad climate bill citizen suit provision allowing citizens (including states and political subdivisions) to sue private actors violating the law. With a law this complicated, and a nascent and massive new market that will only be attractive if real and well enforced, a multiplicity of enforcers is needed. Overextended federal regulators will often not take enforcement actions because their workload is too great, because they don’t have the resources, or because they simply lack the will. In contrast, states and private actors (especially including investors in a cap-and-trade market or possibly environmentalists looking for major noncompliance) may spot illegality and be motivated to sue long before federal agency officials or Department of Justice litigators.  This is a major and problematic gap. 

Overall, this bill moves in the right direction, but retention of state roles remains critical, and adding a citizen suit provision a near necessity if a cap-and-trade market is to become a well policed reality.


William Buzbee, CPR Member Scholar; Prof. of Law, Emory School of Law. Bio.

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