Cap-and-Evade: Climate Change, Environmental Justice, and the Clean Air Act

You’ve heard it before, and you’ll hear it again: climate change is different from traditional environmental problems. It’s global, for one thing. Carbon dioxide isn’t a traditional pollutant, for another. It doesn’t cause cancer. It doesn’t kill fish. Plants use it in photosynthesis; every human and animal emits it. The problem is that combustion creates it, too, which is why our modern, engine-loving world has too much.

CO₂ is also fungible. One ton of CO₂ is as good or bad as any other. So, the thinking goes, trading greenhouse gas emissions makes good sense: under such a program, sources will either reduce their emissions or pay to emit, but as long as the cap is stringent enough, emissions will decrease overall. And those localized concentrations of pollution that environmentalists ordinarily worry about when it comes to trading regimes, those pesky hot spots? Not a problem, because CO₂ is harmless in large concentrations. Unlike a thick cloud of benzene or mercury, a hot spot of CO₂ won’t kill you.

But climate change isn’t different from traditional environmental problems in some important ways, too, and this crucial point is missing from the debate. It can’t be separated from that golden oldie of an environmental problem, air pollution. Combustion doesn’t emit CO₂ in isolation. It also emits harmful “co-pollutants,” including criteria pollutants and toxic pollutants. Unlike CO₂, many of these pollutants have localized effects. Studies have found that residential proximity to fossil-fuel-fired power plants raises the risk of respiratory problems, heart problems, pregnancy complications, premature mortality and autism.  Meanwhile, low-income and minority populations usually bear the brunt of these problems because they are the ones living close to polluted industrial areas.

In the best case, a nationwide greenhouse gas trading program should both lower the nation’s aggregate emissions and reduce locally harmful co-pollutants. But this happy scenario assumes that the Clean Air Act always works well. It doesn’t. Because older and dirtier facilities are more likely to buy allowances than reduce emissions, co-pollutant hot spots could result from a greenhouse gas trading program even if the Clean Air Act is in full effect. We’re not hearing a lot about this. As CPR Member Scholar Alice Kaswan has pointed out in her research, the risk of hot spots is real because:

• The program is likely to be economy-wide, or close to it. Allowances will be tradable among sectors and offsets are likely to be available from a variety of unregulated sources (e.g., from agricultural projects and international trades). Cheaper allowances may result. Older facilities in disadvantaged areas may be tempted to purchase cheaper allowances or offsets to maintain or increase – not reduce – emissions.
• Although the Clean Air Act ostensibly controls co-pollutant emissions, it does not adequately protect communities from hot spots, and a trading program could exacerbate flaws in the Clean Air Act’s design and implementation for the following reasons:
  • On a facility-by-facility basis, Clean Air Act regulation of criteria pollutants generally uses a rate-based approach instead of capping the absolute quantity of the emissions allowed. Again, older facilities in disadvantaged areas may be tempted to purchase cheaper allowances or offsets, thus potentially operating for a longer period of time and increasing absolute co-pollutant emissions. Emissions can increase substantially without triggering New Source Review, and New Source Review does not apply at all if the increases result from increased hours of operation rather than plant modifications.
  • Many toxic co-pollutants of concern, such as mercury, are currently under-regulated or unregulated.
  • Regulatory controls on hazardous air pollutants (HAPs), especially residual risk standards, are under-issued and under-enforced.

Such hot spots have occurred in other non-greenhouse gas trading programs. For example, under “Rule 1610” of the RECLAIM program in the Los Angeles basin, refineries were allowed to meet emissions limits by purchasing emissions credits from the scrapping of cars. Four marine terminals located in neighborhoods with 65 percent minority populations bought a large share of the available credits, creating hot spots of benzene. Further, the nitrogen oxides trading program in RECLAIM also increased emissions in minority communities. A study found that, although regional emissions were dropping, higher concentrations of NOx and air toxics were found in Wilmington, a minority community. Recently, the South Coast Air Quality Management District found that a proposed natural gas “peaker” power plant could result in an increase in annual premature mortality of up to 4 to 12 people in the surrounding area. While peaker plants are significantly cleaner than coal-fired plants, they are also likely to be sited in urban areas with poor air quality. Now, this post is not intended to be a screed against cap-and-trade. As I’ve noted, a well-designed program should improve air quality generally. But the risk that hot spots could occur is real enough, and fairly straightforward safeguards exist to prevent them. California, as is often the case, has led the way in many respects, and federal policymakers should consider its example. Some of the safeguards worth adoption include:

• Follow California’s lead in AB 32 by including provisions that require a trading program to “prevent any increase in the emissions of toxic air contaminants or criteria air pollutants” and not “disproportionately impact low-income communities.”
• Follow California’s lead in AB 32 by requiring the program to complement air quality programs and help achieve air quality standards.
• Ensure that states have the authority to impose direct and more stringent controls on facilities generating greenhouse gas emissions even if they are participating in a federal carbon trading system. For example, the Acid Rain Program allowed states to regulate their facilities’ SO₂ emissions more stringently. A broad state law savings clause should be sufficient for this purpose.
• Impose or allow states to impose conditions on trades and the use of offsets to prevent increases and encourage decreases in co-pollutant emissions in areas suffering serious air quality problems. For example, a state could i) prohibit or limit trades of allowances or the use of offsets into such areas, ii) require the surrender of additional allowances (>allowance/ton) from emitters in hot spot areas, iii) impose a surcharge on allowances in nonattainment areas, or iv) or prohibit the use of offsets by emitters in hot spot areas.  A general state savings clause may not be sufficient to protect state trading controls. More proactive provisions allowing states to condition trades and control allowance allocation are likely to be necessary.

A cap-and-trade program for greenhouse gases is likely to have far-reaching environmental, economic, and political implications. A meaningful cap and auctioning of allowances will go a long way in ensuring that hot spots do not occur and that additional air quality improvements are realized. (See, however, the debate between ClimateProgress’ Joseph Romm and NRDC’s David Hawkins on Grist, which suggests that a stringent cap isn’t assured). Should a safety valve be considered, these safeguards would also reduce the potential adverse effects of lower allowance prices. Finally, these protections would not prohibit the federal program from operating well; rather, they would serve as protective safeguards against risks of hot spots that may result should the federal program have unintended co-pollutant consequences.

Climate change is an environmental problem like nothing we have ever faced, yet it brings some familiar, old problems with the new. Ultimately, the success of whatever trading program is adopted rests, in large part, on the foundation of the Clean Air Act. Unfortunately, if we don’t acknowledge some of the Act’s design flaws, cap-and-trade may turn out to be cap-and-evade, with the most vulnerable populations suffering mightily as a result.

Special thanks goes to CPR Member Scholars Alice Kaswan, Nina Mendelson, and Rena Steinzor, as this blog reflects their research and analysis.