Tuesday, May 12, 2009

UPDATE: OMB on the Cost of EPA Regulation of Greenhouse Gasses

Following up on "White House: CO2 rules to seriously impact economy"
From the White House's Office of Management and Budget blog:

Clearing the Air

Media reports today are suggesting that OMB has found fault with EPA’s proposed finding that emissions of greenhouse gases from motor vehicles contribute to air pollution that endangers public health and welfare. Any reports suggesting that OMB was opposed to the finding are unfounded.

The quotations circulating in the press are from a document in which OMB simply collated and collected disparate comments from various agencies during the inter-agency review process of the proposed finding. These collected comments were not necessarily internally consistent, since they came from multiple sources, and they do not necessarily represent the views of either OMB or the Administration. In other words, we simply receive comments from various agencies and pass them along to EPA for consideration, regardless of the substantive merit of those comments. In general, passing along these types of comments to an agency proposing a finding often helps to improve the quality of the notice.

Perhaps more importantly, OMB concluded review of the preliminary finding several weeks ago, which then allowed EPA to move forward with the proposed finding. As I wrote on this blog on April 17, the "proposed finding is carefully rooted in both law and science." I also noted: "By itself, the EPA’s proposed finding imposes no regulation. (Indeed, by itself, it requires nothing at all.) If and when the endangerment finding is made final, the EPA will turn to the question whether and how to regulate greenhouse gas emissions from new automobiles."

The bottom line is that OMB would have not concluded review, which allows the finding to move forward, if we had concerns about whether EPA’s finding was consistent with either the law or the underlying science. The press reports to the contrary are simply false.
From Jake Tapper's ABC News "Political Punch" blog:

In Inter-agency Memo, "Bush Holdover" Warns of Harm to Economy if Greenhouse Gases Regulated through Clean Air Act**

Criticism in an interagency memo of potential government regulation of greenhouse gases under the Clean Air Act (CAA) -- saying it will hurt the economy, and questioning whether such a "precautionary" move would too expansively open up the door for government regulation -- was written by a holdover from the Bush administration, an Obama administration official said today.

"Making the decision to regulate CO2 under the CAA for the first time is likely to have serious economic consequences for regulated entities throughout the U.S. economy, including small businesses and small communities," states one comment in the memo, which were collected and officially sent by the White House's Office of Management and Budget. "Should EPA later extend this finding to stationary sources, small businesses and institutions would be subject to costly regulatory programs such as New Source Review."

The comments drew attention from the media (including this blog) when they were posted in an Obama administration interagency review responding to the Environmental Protection Agency finding on greenhouse gases.

An administration official says the comments were written by a Bush holdover in the Office of Advocacy in the Small Business Administration, but did not identify the individual.

A spokesman for the Office of Advocacy said he did not know who would have contributed the comments, but noted that Shawne C. McGibbon, the Acting Chief Counsel for Advocacy in the Small Business Administration, wrote about greenhouse gases last November, writing that the expansion of the the scope of the Clean Air Act to regulate greenhouse gases "could make hundreds of thousands of small entities that have not previously had to deal with the Clean Air Act potentially subject to extensive new clean air requirements. ...The compliance burdens associated with these requirements would devastate small entities throughout the economy..."

McGibbon, however, is not a "Bush holdover," having been with SBA since 1994.

The Supreme Court, ruling in the 2007 case Massachusetts v. E.P.A., ordered the EPA to determine whether greenhouse gases endangers public health and welfare.

The Bush administration essentially ignored the ruling.

On April 17, Obama's EPA Administrator, Lisa Jackson, issued a proposed "endangerment finding," which would likely mean the EPA would regulate greenhouse gases -- carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride, treated as a group as an air pollutant -- through the Clean Air Act.

The White House has not yet decided to go forward with any rule-making based on the finding.* There is a 60-day comment period following the finding. As part of this process, the Obama administration requested comment from various departments and agencies on the endangerment finding, which is where the memo came from.

A White House spokesman said the president's preference would be to have greenhouse gas regulation be accomplished through legislation rather than through executive fiat.

"While EPA had an obligation to follow the law and engage in this scientific process in the wake of the Supreme Court ruling, the President has called on Congress to pass comprehensive energy legislation that includes a market based cap on carbon emissions that would transition the nation to a clean energy economy and create millions of green jobs," White House spokesman Ben LaBolt said.

Legislation to regulate greenhouse gases is being written by Rep. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, and Rep. Ed Markey, D-Mass. Waxman will outline details of this bill during a closed-door meeting with Democrats on his committee later today.

In the nine-page memo, the "Bush holdover" voices "a concern that EPA is making a finding based on (1) 'harm' from substances that have no demonstrated direct health effects, such as respiratory or toxic effects, (2) available scientific data that purports to conclusively establish the nature and extent of the adverse public health and welfare impacts are almost exclusively from non-EPA sources, and (3) applying a dramatically expanded precautionary principle."

If the EPA goes forward with a finding of endangerment for all six greenhouse gases, the official warns in the document, "it could be establishing a relaxed and expansive new standard for endangerment. Subsequently, EPA would be petitioned to find endangerment and regulate many other 'pollutants' for the sake of the precautionary principle (e.g., electromagnetic fields, perchlorates, endocrine disruptors, and noise)."

The official also suggests that such a "finding could be strengthened by including additional information on benefits, costs, and risks (where this information exists); meeting appropriate standards for peer review; and accepted research protocols… The Finding should also acknowledge that EPA has not undertaken a systematic risk analysis or cost-benefit analysis."

The comments in the memo will no doubt be seized upon by business lobbyists who oppose Jackson's move, who last month wrote to her warning that an "endangerment finding will set the stage for an economic train wreck and a constitutional crisis." The endangerment finding "will trigger a regulatory cascade threatening the economy," they wrote. "Rather than decry this peril to the economy and the polity, some Obama Administration officials and Members of Congress—and many activists—brandish the endangerment finding as a tool of legislative extortion. Their increasingly audible threat: 'Enact the Waxman-Markey bill, or we’ll unleash the CAA on the economy.'"

- jpt

* Since clarified and corrected, I got the bureacratic language wrong. The EPA's finding went through, it was the rule-making that the White House has not yet decided to do.

** Since updated with information about the author of the comments, according to an Obama administration official.