Success in China moving from participation in the Clean Development Mechanism to a national offset scheme is critical to the development of climate law and policy within China. Examination of the regulatory and institutional arrangements underpinning China’s offset scheme suggests that there is potential for the domestic offset sector to contribute to emissions reductions. However, China will have to navigate several potential pitfalls, ranging from ensuring environmental integrity to avoiding double counting and other issues, to ensure success.

On January 1, 2015, China will formally begin implementing an updated Environmental Protection Law. Originally promulgated in 1989, this is the first time China’s fundamental environmental protection statute has been revised, and, in many ways, it reflects how far China has come in its environmental awareness from 25 years ago.

On October 1, 2014, the Environmental Law Institute held its annual U.S. Supreme Court update for the 2014 term, again featuring the leading experts in the country. ELI President John Cruden led a discussion with two of the most distinguished environmental law school professors in the nation to review the important Clean Air Act cases decided this year, and forecast their implications for future rulemaking, particularly in the greenhouse gas arena. This dialogue presents a transcript of the event, which has been edited for style, clarity, and space considerations.

On June 18, 2014, EPA officially proposed the Clean Power Plan—a rule that aims to reduce CO2 emissions from the nation’s existing fleet of fossil fuel-fired power plants. The proposal was developed pursuant to CAA §111(d), a section of the law for which there is limited regulatory precedent and no direct judicial decisions interpreting the statutory language. Any major new EPA rulemaking is bound to be controversial, and the proposed Clean Power Plan is no exception.

Looking at the history of the Clean Air Act provides some guidance on what Congress intended when it required the “best system of emission reduction” under §111(d) and on EPA’s supervisory authority over state plans. But the drafting error, where the conflicting House and Senate amendments to §111(d) were not reconciled, remains largely uninformed by the legislation’s history and will have to be resolved by EPA and, ultimately, the courts.

EPA’s Clean Power Plan is a rational, solid rulemaking designed to deliver flexible, efficient control of greenhouse gas emissions from existing fossil fuel-fired power plants. EPA has identified the best system of emission reduction that allows states and companies to adjust to locally relevant factors and generation-fleet characteristics, deploying the emission-reduction strategies most appropriate and effective.

An accurate assessment of the stringency of state emission goals under EPA’s proposed Clean Power Plan compares state emission goals to adjusted state emission rates that incorporate known and reasonably foreseeable measures that will affect CO2 emissions from existing power plants. These adjusted emission rates may include projections of actual generation and emissions, which may differ from the building block assumptions used in EPA’s Clean Power Plan.

A significant transition is underway within the electricity sector due to several market forces, retirement of certain plants, and regulatory pressures. There is notable overlap between available strategies for mitigating electricity sector risks and potential compliance strategies for states under the Clean Power Plan.

When designating the “best system of emission reduction” in its Clean Power Plan, EPA considered several factors far beyond the fencelines and control of the regulated power plants. The clear statutory language, context, and regulatory background demonstrate that such a “beyond-the-source” approach is not allowed under §111. To find otherwise would suggest that EPA can require drivers to stay home or to use public transportation in order to reduce motor vehicles’ tailpipe emissions under the Clean Air Act.

EPA’s Clean Power Plan is the Obama Administration’s most important effort to address the challenge of climate change. But it also raises significant legal issues of first impression ranging from unsettled statutory language to EPA’s splintered approach under different subsections of CAA §111 to judicial skepticism about EPA’s expansive CAA approach using a very narrow statutory provision.