How Can Multi-State Compliance Programs in State Implementation Plans under Section 110 of the Clean Air Act Inform the Potential Use of Multi-State, Market-Based Mechanisms for Compliance with Section 111 of the Clean Air Act?

Abstract

The Environmental Protection Agency (“EPA”) has committed to regulating greenhouse gas (“GHG”) emissions from stationary sources under section 111(d) of the Clean Air Act (“CAA”). There are only a few established regulatory programs under section 111(d) that EPA can reference as guidance during this process. Furthermore, the courts have not ruled on whether EPA may authorize the use of multi-state or market-based compliance mechanisms under section 111(d). However, section 111(d) explains that the regulatory process in 111(d) should be “similar to that provided by [section] 110.” Many states use multi-state, market-based compliance mechanisms to meet the requirements of section 110. Three section 110 programs, specifically, the NOx SIP Call, the Regional Haze program, and the Transportation Conformity program, serve as legal and structural examples of how EPA could develop regulations for GHG emissions under 111(d).

Based on experiences with these 110 programs, EPA can learn valuable lessons for the development of a regulatory program that provides flexibility for states to use multi-state, market-based mechanisms for compliance. First, the NOx SIP Call and Clean Air Interstate Rule (“CAIR”) litigation demonstrate the D.C. Circuit’s commitment to the exact language in the CAA. The court was, and could be suspicious of any programs that deviate from the source specific language of 111(d), making it important for EPA to provide sound legal ground for varying from the source-specific nature of 111(d). Furthermore, EPA should not create a program that forces states to impose regulations outside of the states’ statutory responsibilities. EPA should not restrain states choices, but instead, allow states the flexibility in the development standards of performance. EPA should also develop backstops for flexible programs to ensure all states and all sources meet their emissions reductions, regardless of what happens in the courts. This would allow EPA to give states the authority to implement flexible mechanisms while ensuring that all states will reduce GHG emissions, even if the court strikes down EPA’s authorization of non-source-specific programs, thereby avoiding the “unpromulgated limbo” problems that arose in the Regional Haze litigation. Finally, Transportation Conformity stands as an example of a flexible compliance mechanism under 110 that could be used as a model for justifying the use of similarly flexible mechanisms in a 110-like program under section 111(d). The regional budget setting process that states use under the Transportation Conformity program provides a concrete example of states working together to achieve compliance under section 110.

After analyzing these three programs, this paper considers two lines of policy arguments supporting the use of multi-state, market-based programs under 111(d). This paper assumes that EPA has the authority to create regulations under 111(d) that are not source-specific, technology standards. Rather, the language of 111(d) authorizes the agency to create the “best system of emissions reduction” which could include market-based programs.