Clean Air Act - Cost Considerations

Harvard Law Review, November 2014 | Go to article overview

Clean Air Act - Cost Considerations


Air pollution has no respect for state borders. (1) Harmful pollutants generated by factories, power plants, and other sources in upwind states may travel hundreds of miles to reach downwind states, which receive no economic benefit in return for their degraded air quality. (2) Last Term, in EPA v. EME Homer City Generation, L.P., (3) the Supreme Court upheld the Environmental Protection Agency's (EPA) most recent interpretation of the Clean Air Act's (4) "Good Neighbor Provision," (5) which calls on the states to reduce their emissions of pollutants that prevent other states from attaining the minimum national air quality standards. (6) In an apparent environmental victory, the Court allowed EPA to undertake a cost-effective allocation of emissions-reduction responsibilities and to immediately promulgate Federal Implementation Plans to bring those allocations into effect. (7) Although the decision is not incompatible with the Court's famous Whitman v. American Trucking Ass'ns (8) opinion, which banned the consideration of costs in setting the national air quality standards, (9) it nevertheless signals a troubling shift toward the permissibility of cost considerations in environmental regulation.

The Clean Air Act (CAA) directs EPA to set National Ambient Air Quality Standards (NAAQS) at levels "requisite to protect the public health," (10) establishing maximum allowable concentrations of several air pollutants that are emitted by numerous and diverse sources. (11) Each state then has "primary responsibility" (12) for attaining these NAAQS by promulgating federally enforceable State Implementation Plans (SIPs) for reducing in-state emissions. (13) Under the Good Neighbor Provision, each state's SIP must also "contain adequate provisions" to prevent in-state emissions "in amounts which will ... contribute significantly to nonattainment in, or interfere with maintenance by, any other State with respect to [the NAAQS]." (14) If EPA disapproves a SIP or finds that a state has failed to submit a SIP by the statutory deadline, EPA must promulgate a replacement Federal Implementation Plan (FIP) within two years of that finding. (15)

EPA's attempts at implementing the Good Neighbor Provision have been rejected by the D.C. Circuit more often than not. In Michigan v. EPA, (16) the D.C. Circuit upheld EPA's decision in its "NOx SIP Call" regulation (17) to cap reduction requirements at levels that could be achieved with "highly cost-effective controls," (18) despite a dissent from Judge Sentelle arguing that cost considerations were clearly prohibited. (19) But in North Carolina v. EPA, (20) the D.C. Circuit rejected EPA's subsequent cap-and-trade-style Clean Air Interstate Rule (21) (CAIR) on grounds of impermissible cost considerations and a failure to achieve "measurable progress" (22) toward downwind state air quality goals. (23) Most recently, in August 2011, EPA replaced CAIR with the Transport Rule, (24) imposing mandatory emissions limits on each state that contributed at least one percent of any NAAQS of any downwind state. (25) EPA chose state-specific limits based on what it determined were "significant cost thresholds" for achieving noticeable downwind air quality improvements. (26) Having previously disapproved the relevant SIPs with respect to the states' good-neighbor obligations, (27) EPA simultaneously promulgated FIPs to immediately impose the appropriate emissions controls, particularly on fossil fuel-fired power plants. (28)

A divided panel of the D.C. Circuit vacated the Transport Rule in its entirety. (29) Writing for the majority, Judge Kavanaugh (30) held that EPA had exceeded its statutory authority in two independent ways. First, he held that EPA had crossed three "red lines" (31) by effectively or potentially requiring too great an emissions reduction from particular upwind states. (32) He reasoned that the Transport Rule might (1) require states to bring their emissions below the one percent contribution threshold that EPA had established in its first stage of analysis, (33) (2) require states to make emissions reductions disproportionate to their respective contributions to downwind air pollution, (34) and/or (3) require states to do more than necessary to achieve attainment of the NAAQS in downwind states. …

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