COLUMN-Success of Obama's carbon plan to depend on courts: Wynn
(The author is a Reuters market analyst. The views expressed are his own.)
LONDON, June 25 (Reuters) - President Barack Obama will bypass Congress in a plan to impose new rules to curb coal plants' carbon dioxide emissions, and that means the real test will come in court.
Obama's move, announced on Tuesday, has long been awaited by green groups hoping it will help meet emissions goals and feared by lobbies representing fossil fuel producers and industrial companies.
In his first term, Republican opposition in Congress blocked legislative action to cut greenhouse gas emissions, and even the use of the words "climate change" became taboo.
In the run-up to the last election, Obama uttered the words "climate change" just once in 2011, after mentioning its "urgent danger" frequently in the two previous years, according to Harvard Law School's Richard Lazarus.
Now that Obama is newly empowered by a second term, he has put the curbing of greenhouse gas emissions once more on his agenda, and existing power plants, their biggest single source, will be the focus.
Obama will act through new regulation by the federal Environmental Protection Agency under the 1970 Clean Air Act (CAA).
Any regulation will face an inevitable legal challenge from polluters, however. They are likely to focus on the fact that the CAA has been used so far only to regulate emissions from vehicles, not power plants, and that there is little legal precedent for using innovative schemes such as emissions trading.
The ultimate judicial mandate for the EPA regulation arises from a U.S. Supreme Court ruling in 2007 that greenhouse gases fall within the definition of "air pollutant" under the CAA.
In that case, the Commonwealth of Massachusetts and several environmental groups sued the EPA to regulate greenhouse gases from new motor vehicles. The court ruling required the EPA to determine whether greenhouse gases endangered public health or welfare.
The EPA in December 2009 issued an "endangerment finding" that greenhouse gases did indeed endanger public health and then proceeded to issue regulations for CO2 emissions from new motor vehicles, implemented in March 2010.
In June 2012, the U.S. Court of Appeals for the District of Columbia Circuit combined and dismissed more than 100 challenges to the new EPA standards, finding that the agency had acted within its statutory authority.
That victory was in a case that referred not only to new motor vehicle emissions but also to the EPA's intention to regulate stationary sources, in other words power plants.
The Obama administration has pledged to cut greenhouse gas emissions by 17 percent from 2005 levels by 2020.
Emissions were less than 7 percent below 2005 levels in 2011, according to the EPA's latest annual inventory, implying that cuts would have to go beyond the motor vehicle sector.
Power generation is the biggest source of U.S. emissions at 32.8 percent, with coal at 25.7 percent, according to the EPA.
In April last year EPA took its first step to regulate power generation when it proposed to restrict CO2 emissions from new coal plants to 1,000 pounds per megawatt hour (MWh).
The law requires the EPA to regulate emissions using an "adequately demonstrated" system or technology.
The type of plant that is already the technology of choice for new U.S. power plants, combined cycle gas turbine generation, can easily meet the standard.
But new coal plants can meet the requirement only by fitting expensive, untested technology for carbon capture and sequestration.
The proposed rule included some flexibility, however, by allowing coal plants to meet the standard by averaging their emissions over 30 years. They could start generating power without the technology and wait for it to be developed commercially.
In its proposals to regulate new coal plants, the EPA has taken a command and control approach, applying a New Source Performance Standard (NSPS) across the power generation sector nationally.
The EPA already regulates emissions of other pollutants from power plants in an approach based on performance standards, which it can cite as a precedent.
Applying EPA rules to existing coal power plants, which accounted for 37 percent of all U.S. power generation in 2012, is less clear-cut, however.
It would have to give states flexibility to meet performance standards, given that there is no easily available, proven technology to limit CO2 emissions from existing coal plants.
Such flexibility could include setting an aggregate cap on the carbon emissions of a state's power sector as a whole. That could be implemented through a trading scheme. Utilities that exceed the emissions cap because they have more coal plants would have to buy permits from others that emit less.
There is little precedent for such trading schemes under the NSPS programme, however, which raises the question whether the EPA could recommend that as a "best system of emission reduction" as cited in the law.
"The term 'standard of performance' means a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the administrator determines," the CAA states.
EPA scored a significant success last June in defeating challenges against its intention to regulate power plants.
Now under Obama's plan, the EPA will make specific proposals to limit emissions from existing plants as well as new sources, and it may have limited legal precedent on which to rely under the CAA.
For those reasons, Obama's speech on Tuesday is only a first step. The EPA must then tread carefully - stressing cost-effective approaches - to win the inevitable legal challenge.
(editing by Jane Baird)