The Second Term: Joseph Aldy on Environmental policy

January 25, 2013
By Doug Gavel, Harvard Kennedy School Communications

President Obama's second term in office began on Inauguration Day, January 21st, and the list of policy challenges facing his administration is daunting. Aside from the difficult task of addressing the nation's economic woes, the president and his administration will also deal with the increasing complexities of global climate change, a rapidly changing energy market, entitlement and tax reform, healthcare reform, and the repercussions from the still simmering "Arab Spring." Throughout this month, we will solicit the viewpoints of a variety of HKS faculty members to provide a range of perspectives on the promise and pitfalls of The Second Term.
We spoke with Joseph Aldy, assistant professor of public policy about environmental policy in the U.S. in the president's next four years in the oval office.

Q:What are the top priorities for a second Obama administration in environmental policy?
A:Tackling climate change represents the most important environmental policy priority and the most significant piece of unfinished business in the energy and environmental policy space left over from the first term. The Obama Administration made some strong, initial efforts through executive authority to mitigate greenhouse gas emissions, such as through new regulations to double the fuel economy of cars and small trucks. The Administration has proposed emission standards for new power plants, which it will likely finalize in 2013, but work remains to be completed for standards on existing power plants as well as for a broad array of other sources, including refineries and other manufacturing facilities. In addition, the loss of life and extensive destruction of homes and infrastructure from Hurricane Sandy points to the need for a serious discussion of ways to promote adaptation to climate change.
Beyond climate change, the Administration will have opportunities to reduce local air pollution that contributes to premature mortality, hospital admissions, and lost worker productivity. The Environmental Protection Agency (EPA) has solicited feedback on its regulatory standards to reduce mercury and air toxic emissions from power plants and will likely finish any changes to these standards over the next year. The EPA will also need to address the Federal Appeals Court ruling that effectively threw out the so-called Cross-State Air Pollution Rule that EPA estimated would yield $100+ billion in annual health and economic benefits by reducing fine particulate and ozone pollution. EPA could further reduce sulfur emissions from gasoline through so-called Tier 3 standards, building on the Tier 2 standards implemented in the late 1990s.
Q:What will be the potential challenges/roadblocks in the way of implementing those top priorities?
A:The Administration can make progress in mitigating greenhouse gas emissions and reducing local air pollution under existing legislative authorities, primarily the Clean Air Act. Such regulatory actions will need to overcome two types of roadblocks. First, Congress could challenge these environmental standards under the Congressional Review Act (CRA), which permits Congress to reject major regulations under an expedited, 60-day procedure. The House of Representatives voted for legislation in the last session of Congress to implement a moratorium on all types of new regulations as well. It is unlikely, however, that both Houses of Congress could muster a two-thirds majority to override a Presidential veto of a CRA resolution to reject a specific rule or of a regulatory moratorium bill.
Second, any new regulation will likely face judicial challenge, especially new standards to address existing sources of greenhouse gas emissions, which will be based on largely untested provisions of the Clean Air Act. Judicial challenges could lead to long delays; the Cross-State Air Pollution Rule of 2011, which was thrown out in 2012 by the Appeals Court, was implemented in response to a 2008 court ruling that threw out the 2005 Clean Air Interstate Rule.
Given the scale of the challenge of combating climate change and the need to transform the way we produce and use energy, the more daunting challenge is the fact that comprehensive, cost-effective, long-term policies are necessary. Making serious progress on the President’s goal to lower U.S. greenhouse gas emissions more than 80% by 2050 will require legislative action. Thus, the tall task is then to identify potential common ground between the Obama Administration and the House of Representatives on climate change policy. In addition to addressing the partisan divide on this issue, any successful legislative effort will need to confront the regional differences in attitudes and concerns about costs of a climate change policy program.
Q:Where do openings/possibilities for compromises exist in those areas?
A:Given the significant differences between the Democrats’ 2009 energy and climate bill and the Republicans’ 2011 energy bill in the House of Representatives, it is difficult to envision common ground. An alternative vehicle for advancing legislative action on climate change could be fiscal and tax reform. The need to raise revenue and cut spending necessary to reduce long-term deficits and the interest in reforming the tax code presents an opportunity for a carbon tax.
While a carbon tax has typically received tepid support in the past, and has been viewed as politically inferior to cap-and-trade, it may have brighter prospects in the context of fiscal and tax reform because of the unappealing nature of the alternatives (for example, eliminating the home mortgage interest deduction, higher corporate income tax rates, cutting defense and entitlement spending, etc.). Thus, the revenue a carbon tax could produce (perhaps $100+ billion per year) may facilitate a compromise on a “big” fiscal and tax reform deal, and deliver the long-term price signals to deliver cost-effective emission reductions and technological innovation.
Q:Are there lessons that a second Obama administration can draw upon from the first administration, or from history, when constructing its environmental policy over the next four years?
A:Historically, environmental legislation has passed with bipartisan support (e.g., the Nixon White House working with Democrat-controlled Congress in the early 1970s and the first Bush White House working with Democrat-controlled Congress on the Clean Air Act Amendments of 1990). If there is not common ground for a climate change bill, then perhaps a bipartisan big fiscal and tax reform deal could serve as the vehicle for legislative action on climate change policy.
Short of any kind of legislative compromise, the President can employ the existing authorities under the Clean Air Act. Some lessons can be drawn from the effort of the Clinton Administration after 1994, when it focused on administrative actions, especially its rule-making authority to improve air quality. The Clinton Administration promulgated major new standards for ozone and particulate matter and tackled sulfur in gasoline and diesel fuels. President Obama can deliver important, if not transformational, environmental policy benefits through his existing authorities.

inauguration day Tuesday, Jan 20, 2009

Tuesday, Jan 20, 2009

"Beyond climate change, the Administration will have opportunities to reduce local air pollution that contributes to premature mortality, hospital admissions, and lost worker productivity," writes Aldy.

Joseph Aldy, assistant professor of public policy

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