President Ted Cruz and the Clean Power Plan

 Actually, when I first presented this analysis out in Palo Alto, it was President Marco Rubio. And I still have a not-entirely-rational soft spot for my man from Miami. But right now the senator from Texas is looking slightly more likely. 

Not that it matters. First, Marco Rubio is a Republican, and one of the many sad things about the current Republican party is that they are all identical on the subject of carbon emissions. As in, they don’t care. Bush, Cruz, Kasich, Rubio, Trump no difference. 

Second, American regulatory law is set up to make it essentially impossible for an incoming president to repeal regulation short of changing the underlying  legislation. Agencies issue regulations because Congress realized that laws could not be written to cover every contingency as if they were simple algorithms. The big legislation governing the process is the Administrative Procedures Act of 1946, which deliberately slows down the rulemaking process to allow for comment periods ... which is when lobbyists work their magic. Sadly, the magic does not involve hanging out in hotel lobbies with expensive cigars. Rather, it involves “expert” testimony designed to influence the final rule. 

Presidents can order agencies to create rules or repeal them, but the latter is almost impossible given the administrative process. On the other hand, they have widespread authority to grant exemptions and slow walk implementation. So ...

President Rubio Cruz could:

1. Slow walk approval of state plans, or allow plans based on dubious assumptions to be approved;
2. Grant extensions to states with high concentrations of coal plants (KY and WV);
3. Allow Congress to overturn the existing plan via the Congressional Review Act of 1996. If the GOP gets a 60-seat majority of the Senate in ‘16, this trumps all else.

In other words, absent a filibuster-proof majority (or a GOP abolition of the institution) the options are limited. But they will be even more limited if the Obama adminstration manages to complete before January 2017 the rule governing what will happen should a state reject the Clean Power Plan. Right now, the plan is to default those states to a cap-and-trade system, the kind of thing that President McCain would have initiated. 

That would worsen the Rubio Cruz dilemma.

Consider the marginal firm under a cap-and-trade system where permits are allocated rather than auctioned. Before a cap-and-trade system, that firm was making $X per ton of CO2. Under cap-and-trade, the cost of carbon abatement = the price of a permit, call it $Y.

The firm will either spend $Y, reduce emissions and earn $Y from selling its permit … or it will just use its permit. It still makes $X.

That is for the marginal firm. Some firms will lose, because for those firms the cost per ton of abatement will be greater than $Y. They will need to pay the additional costs or buy more permits. But for a lot of firms, the cost of abatement will be less than $Y. And those firms will be better off under cap-and-trade than they were before: they will pay the cost of abatement and free up permits for sale. One the system is in place, they will mobilize to keep it in place. And that will wreck the politics of global warming denialism.

I suspect that a President Cruz might barrel ahead regardless. The good news is that Cruz will hurt his own re-election chances. Rubio or Trump is more likely to acquiesce to the political reality. 

The rub is that much depends on the ability of the Obama administration to get the rules out before January (more realistically, November) and that is by no means certain. 

In short:

1. A GOP president will likely do nothing if a cap-and-trade system comes in, unless he or she does not care about being re-elected in 2020.
2. If there is no cap-and-trade system, he or she will be able to do a lot of damage around the margins, but not destroy the reforms.
3. Unless we get 60 GOP senators, in which case all bets are off.

Is this helpful? I will change my blogging voice to suit; clarity is important.

Comments

[Phil]

An interesting fringe anecdote re: incoming presidents repealing regulation occurred in 2001, when Dick Cheney immediately ordered the cessation of work at the Government Printing Office upon taking office. This prevented late Clinton regulations from going into effect since they could not be printed in the Federal Register.
Probably of no consequence here, of course.

[Noel Maurer]

That was a hell of an episode! And it's completely relevant to the above discussion.

Short version: what Phil said, although the actual memo came from the President's chief of staff. (The Veep's fingerprints were all over it, however, so I stand by Phil's characterization.)

Longer version: a GAO investigation found that the move hit 371 rules in theory. 281 of them took effect on schedule. Of the remaining 90, 75 nonetheless took effect by January 20, 2002. Of the remaining 15, one was withdrawn and 13 had been altered in some way: three of those had been completely rewritten. (See https://www.gpo.gov/fdsys/pkg/GAOREPORTS-GAO-02-370R/html/GAOREPORTS-GAO-02-370R.htm.)

But it should be noted that the Clinton Administration did the exact same thing! In 1993, Leon Panetta sent a memo ordering department heads to "(1) not send proposed or final rules to the Office of the Federal Register for publication until they had been approved by an agency head appointed by President Clinton and confirmed by the Senate, and (2) withdraw from the Office of the Federal Register all regulations that had not been published in the Federal Register and that could be
withdrawn under existing procedures." (See https://www.fas.org/sgp/crs/misc/R42612.pdf.)

The Bush administration, however, got in trouble because they didn't allow for a comment period when issuing their revised rules. One of the withdrawn regulations concerned energy-efficiency for air conditioners: a court order forced its implementation in 2004. (See http://www.nrdc.org/media/pressreleases/040116.asp.) Similarly, rules limiting road-building in national forests and arsenic levels in drinking water went into effect with much delay.

What's the relevance for President Ted Cruz? Well, it means that the Obama administration had better be damned sure that it gets every "t" crossed by January 20, 2017! But it also means that even if the Obama administration misses the deadline, the Cruz administration will need to prepare an airtight legal case or risk seeing the rules implemented anyway.

Alternatively, if the GOP still controls Congress in 2017, President Cruz can try repeal via the Congressional Review Act. But that will be very hard without 60 senators. For a good primer, see http://harvardlawreview.org/wp-content/uploads/pdfs/vol_122_the_mysteries.pdf.

[Logan]

"One the system is in place, they will mobilize to keep it in place. And that will wreck the politics of global warming denialism."

and ...

"A GOP president will likely do nothing if a cap-and-trade system comes in, unless he or she does not care about being re-elected in 2020."

Perhaps, but there's some level of organization that would be required to build up a network of businesses opposed to rolling back the EPA's plans. The firms better off under cap and trade may take some time to feel comfortable with the system and feel strong enough ownership over their advantages to want to defend them, politically.

It's what makes aspects of the ACA some of the policies most likely to survive a Republican Presidency even though Obamacare is the number one target of everyone running. Some policies may be too popular to entirely do away with, they'll have to figure out how to repeal Obamacare without repealing the policies. But this situation may have been different with President Romney in 2013 than President Cruz in 2017.

I think you're on point overall, but I think the political calculation for a President Cruz will be just a little different than what you map out. There's a blue state-red state divide over the impacts of the rule and where fearmongering about the War on Coal is most effective. It would be a political calculation of offending moderate upscale voters in Colorado and Virginia versus appeasing the base, plus the donor network. A Midwest-based Cruz victory may not care, even if you have business support for the plan.

[Noel Maurer]

Actually, Logan, I think you've hit something that I missed ... namely, cap-and-trade won't be born cleanly on January 2017.

The regulation will most likely give states the option of joining either the California-Quebec scheme or the Regional Greenhouse Gas Initiative. But those states won't be fully in the schemes by January 2017. At best, they will be preparing to enter the schemes.

In addition, the RGGI has massively overissued permits, so their price is rock-bottom. It is unlikely that the scheme has contributed much to carbon emission reduction. And it is unlikely that the cheap permits on offer will move companies' needle by much.

Finally, the RGGI has a structure that makes economic sense but isn't the smartest political move. The post assumes that permits are allocated to firms on the basis of historic emissions, which is what the European Union does for 60% of its permits. (See http://ec.europa.eu/clima/policies/ets/cap/auctioning/index_en.htm.) Firms in the RGGI need to buy permits at auction or on the secondary market; they can then resell them if they reduce their carbon emissions. But that reduces the financial windfall gained by efficient firms --- after all, it's better to get the permits for free than to pay for them!

The upshot is that the Clean Power Plan won't be safe even if the administration gets the rules done by January 2017. The new rules will gain support, but not as much as they could under free allocation. So if President Cruz gets a GOP senate at any time during his term, they he will likely repeal the rules under the Congressional Review Act.

To be clear, free allocation is not economically efficient. It also means that cap-and-trade will raise no public revenues. But it makes political sense! Only it's not what we've got.

You also raise an additional point, which is that if efficient companies are disproportionately based in blue states, then President Cruz will care less about their interest in an existing cap-and-trade scheme. Money talks, of course, but not that much.

Good points, Logan. I walk back the argument. Cruz will be able to do little without sufficient Senate votes, but if he gets them during his first term (or even a hypothetical second one) the politics are unlikely to have changed enough to prevent him from repealing the Clean Power Plan.

That said, individual blue states will likely keep the regulations in place, even if they would never have implemented those regulations without President Obama's actions. That will be a lasting difference ... but I'm quibbling.