Abby L. Harvey
GHG Daily
1/28/2016
The Clean Air Act, while a wonderful piece of legislation, has a fatal flaw, according to Richard Revesz, director of the Institute for Policy Integrity at the New York University School of Law. That flaw is the inherent “grandfathering” of existing emitting sources. “This is a typical move in regulatory policy,” Revesz said Wednesday at an Environmental Law Institute event. “A regulator sets stringent standards for new sources and exempts existing sources from those standards. … You can understand why this would happen. It’s in some ways a way to buy the support of existing sources or at least to blunt the opposition.”
Revesz, who recently co-authored a book exploring the issue of grandfathering, explained the implications of the grandfathering in the Clean Air Act. “This kind of practice leads to some quite perverse incentives,” he said, adding that if stringent standards are placed on new sources, making them more expensive to build, the incentive then is to avoid the extra cost by running existing sources longer.
This can be seen with the nation’s aging power plants. In 1970, when the Clean Air Act was enacted, Congress surveyed the existing fleet and, seeing that much of it had reached or was close to close to reaching the end of facilities’ estimated 30-year useful life, chose not to write the law to apply stringent standards to them. This was done under the assumption that those plants would soon retire and be replaced by new, cleaner, regulated sources. However, the existing sources were not closed down as Congress has imagined, and many are still operating now.
“The reason, of course, is that what makes existing sources close down and be replaced by new sources is that they’re less efficient and therefore after some period of time it’s just basically worth the investment to have a new source replace the existing source,” Revesz explained. “But if you impose very high costs on the new sources and no comparable cost on the existing sources then you now make it economically desirable to operate the existing sources a lot longer.”
Revesz did note that aging power plants are starting to be retired in large numbers. William M. Bumpers a partner at Baker Botts said during the event that he estimates 100 GW of coal generation will retire by 2025. This could be due to new regulations being placed on the existing sources in recent years, such as the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS) and carbon emissions standards. It could also be due to the low cost of natural gas causing a shift away from coal.
Others speaking at the event did not share Revesz’s belief that grandfathering is a flaw of the Clean Air Act. “If you leave aside the CO2 issue for a moment … the Clean Air Act has worked very, very well with grandfathering,” said William Rosenberg, former assistant administrator for the EPA’s Office of Air and Radiation.
David Doniger, director of the Climate & Clean Air Program at the Natural Resources Defense Council, stated that now that plants are beginning to shut down it does appear the grandfathering policy in the Clean Air Act worked, just not as quickly as would have been ideal. “These things take time, I know, but if you were trying to make policy for the future, you want to try to develop a structure that won’t require so much time,” he said.
Revesz said the regulations developed under the Clean Air Act do not represent the most efficient way to handle air pollution. “If you have [an emissions] trading system that includes both new and existing sources, a lot of this grandfathering problem goes away. That’s a huge virtue of having a broad trading scheme,” he said.
