The EPA’s Abdication

This is an edition of Heatmap Daily, an evening review of the day’s news written by our executive editor. Sign up for it here.

Happy Monday. It’s going to be a big week. Let’s begin with the immediate news.

This afternoon, the Environmental Protection Agency formally rolled back limits on greenhouse gas pollution from existing power plants — and proposed scrapping the rest. If the proposal is finalized, then coal and natural gas power plant operators could soon release as much heat-trapping pollution as they want into the atmosphere. And thanks to other recent rollbacks, power plants can release more mercury, microscopic soot, and other hazardous air pollutants, too.

EPA Administrator Lee Zeldin made the announcement at a Group of 20 energy minister meeting in Houston.

On a legal basis, the agency is formalizing the change in two steps: First, it partially repealed some rules for power plant emissions; second, it filed a separate legal argument that the Clean Air Act “does not authorize the EPA to regulate emissions from power plants” to fight climate change. Both documents will likely go into effect later this year. Those documents were released as I wrote this newsletter, and we’re still digging through them at Heatmap.

But there are two broader ways, I think, to see this news.

The first is that it confirms America’s abdication of environmental leadership under the Trump administration. Global climate politics is now in a quite different situation than it was in, say, 2018, when the Trump administration last made similar deregulatory moves. China now operates the world’s largest carbon emissions trading system — and while that system targets an odd “intensity” measurement, and gives away many free allowances, it is expanding to other sectors of the economy and the country plans to adopt more conventional targets next year.

Which isn’t to say it’s perfect. I could find something important to criticize about China, Canada, and the European Union’s various carbon schemes. But they have policies at the national or supranational level, and the United States does not. While we still have a handful of state regional policies — such as the-cap and-trade market for Northeastern states — they have been transformed by the politics of inflation.

And things could still get worse. Earlier this year, the Trump administration repealed the EPA’s scientific finding that heat-trapping greenhouse gases can endanger the environment. If it successfully defends that move in court, then any future government will face extra hurdles when seeking to limit carbon pollution. And if the Trump administration secures the Supreme Court ruling it is obviously angling for — and gets the high court to overturn its landmark 2007 decision that said the EPA could regulate greenhouse gases in the first place — then a future Democratic administration might find itself virtually without tools to limit carbon emissions.

The second way of seeing this news, though, is that little has actually changed on the ground — and the biggest unanswered question in American climate policy remains unanswered. Since the Obama administration, the federal government has regulated carbon pollution from cars and trucks (though Trump has of course sought to put an end to those rules, too). But it has never found a way to limit power plant carbon emissions in a comprehensive way.

Instead, successive Democratic presidents, Trump administrations, and the Supreme Court have played a slow-motion, 12-year-long game of regulatory ping pong. In 2014, President Obama proposed a scheme to cut carbon emissions from power plants. Since then, the first Trump administration repealed those rules, the Supreme Court stayed them (and then eventually nixed them), and President Biden proposed a new and more narrow version of them — which the Trump administration has just repealed. And Trump wants to end the game forever by preventing the Clean Air Act from ever regulating carbon emissions.

Trump and his officials are acting irresponsibly by doing so — to say the least. But the truth is that Democratic presidents have never found an enduring way to regulate power plant carbon emissions that the Supreme Court has blessed. And doing so has only gotten harder as the court has marched right over the past decade.

We will keep diving into these new documents here at Heatmap. But we have already covered this story in depth over the past 18 months, too. Check out:

• My colleague Emily Pontecorvo’s look at the one word the EPA (and the Trump administration) is hanging this rulemaking on.
• Emily’s interview with Jody Freeman, who helped shape the Obama administration’s climate strategy, about what might come next.
• And why the EPA’s rollback may get a test as soon as next month, when the Supreme Court hears a case about the city of Boulder, Colorado’s climate lawsuit.

There is one more thing to look forward to this week, by the way. On Wednesday, the Federal Reserve will decide whether to raise interest rates. Investors now expect it to bump the federal funds rate by one-quarter of a percentage point, which will affect the investment climate for every part of the energy system — including renewables.

As my colleague Matt Zeitlin has written, interest rates dictate the economics of clean energy because most spending on renewables and other zero-carbon power plants happens at the front end, as capital expenditure. Spending on fossil fuel projects, on the other hand, is more spread out, because operators must purchase fuel over time.

One big question that the Fed will eventually need to confront: Is there any way to rein in above-trend inflation without reducing artificial intelligence spending?

We’ll be covering that story and more as the week develops. Thanks as always for reading.