Will EPA Try to Save Cap-and-Trade?

Of Washington's innumerable agencies, EPA has a bit of a killjoy reputation. Businesses dread its regulatory grip, legislators decry its plodding, bureaucratic approach, and environmental advocates prefer well-crafted legislation to many its clumsy regulations. But with a climate bill, much less a well-crafted one, far from the horizon, EPA is taking seriously its role as a last line of defense against emissions and climate change.

The agency is releasing a new raft of greenhouse gas emission regulations this month, and some observers are wondering whether administrators have plans to exercise a last-ditch option: using the Clean Air Act to skirt Congress and institute an EPA cap-and-trade program for carbon dioxide.

One of the most versatile environmental laws in the U.S., the Clean Air Act has been amended and revised throughout the years to adjust to shifting environmental threats. In the 1990s, regulators used the act to set up a pollutant trading system to combat acid rain, a strategy that was considered quite successful. When EPA asked for $7.5 million to look into "market-oriented" greenhouse gas reduction mechanisms in its 2011 budget request, the agency prompted speculation that it was planning on implementing its own cap-and-trade system if a Congressional version fell through.

Such an approach could face political difficulties, since Congress must approve EPA's budget, and would surely be challenged in court. Georgetown Law professor Lisa Heinzerling predicts that justifying a cap-and-trade system under the Clean Air Act as it currently stands would require "a good bit of interpretive creativity." EPA administrators have attempted to downplay speculation, claiming that the request was intended to investigate regulation of "specific industries" rather than "economy-wide approaches or systems." At a National Press Club lunch yesterday, EPA chief Lisa Jackson denied plans for a "cap-and-trade regime" all together.

Don't assume that the option is officially off the table, however. "Market-oriented mechanisms" could mean many things, and EPA is well aware of the power of market incentives to curb emissions. The agency does not want to attract undue attention while it battles high-profile senatorial challenges to its new regulations, but Jackson's EPA has established itself as a regulatory force to be reckoned with. If there's a way to wrangle cap-and-trade out of the Clean Air Act, rest assured she's considering doing it.