Lisa Jackson's High-Wire Act on Carbon Controls

Early in his Presidency, Barack Obama made it clear that if Congress failed to limit carbon emissions, he would use his authority under the Clean Air Act to control greenhouse gases. Now that Congress has pulled the plug on legislation, that task has fallen to Lisa Jackson, Obama's Environmental Protection Agency chief. Caught between business groups and some Senate Democrats who want to stop her, and environmental organizations that say she's not going far enough, Jackson may have the toughest job in town.

Even she agrees that regulation is inferior to legislation. It took a 2007 Supreme Court ruling to clarify that the 1970 law gave the agency the power to regulate carbon at all. One of Jackson's first moves as EPA administrator was to take up the court's invitation and declare carbon an environmental threat. Within weeks, she followed that with rules requiring automakers to boost fuel economy 5 percent a year and average 35.5 miles per gallon by 2016.

Those rules, effective Jan. 2, 2011, will mark the U.S.'s first-ever nationwide limits on greenhouse gas pollution. Now, having taken that step, Jackson by law must clamp down on other carbon sources. In an economic downturn, she hopes to avoid writing detailed diktats for small businesses, schools, hospitals, and apartment buildings—many of which emit enough carbon that broad-based rules could force them to install expensive equipment. That could be politically explosive in a midterm election year, letting Republicans charge that Obama is strangling the economy.

Instead, Jackson has moved cautiously by offering what she calls a "tailored" approach that exempts mom-and-pop dry cleaners and pizza parlors and initially regulates only power plants and oil refineries. And among those, only new or expanding plants need comply.

Even so, business groups, led by the U.S. Chamber of Commerce, are taking Jackson to court, saying she has no authority to regulate greenhouse gases under the Clean Air Act. Keith McCoy, vice-president for energy and resources policy at the National Association of Manufacturers, calls the greenhouse gas rules "one of the greatest bureaucratic power grabs in the history of the U.S."

Some industry groups are making an unusual argument: that Jackson's not going far enough. It's all or nothing, they say, knowing that all-out regulation would be untenable. If the EPA wishes to regulate carbon, "then it ought to have to regulate facilities large and small and suffer all the consequences, warts and all," says Scott Segal, a Washington lawyer at Bracewell & Giuliani who lobbies for coal-fired utilities Southern Co. (SO) and Duke Energy (DUK), among others.

Segal and other lobbyists are on guard for Jackson's next move this fall, when the EPA will issue guidance to refiners and power plants on the "best available control technology" to limit the largest amount of emissions, taking into account cost and availability. If the guidance is severe, says Segal, it could delay new construction and expansion by manufacturers—and harm job creation.

Some Democrats from coal-producing states want to stop or postpone the EPA's efforts. Senator Jay Rockefeller (D-W. Va.) has readied a measure that would delay any rule for two years. To succeed, he would need 18 other Democrats to join 41 Republicans—not impossible, considering that half the states mine coal or burn it for most of their electricity.

An environmental group, the Center for Biological Diversity, sued the agency in early August, claiming the tailored regulations leave out too many large polluters. Texas Governor Rick Perry, meanwhile, has filed a lawsuit against the EPA for singling out refineries and power plants. "It's a knife's edge the EPA is walking right now," says Robert Stavins, director of Harvard University's Environmental Economics Program. He calls the EPA approach "inappropriate and unfortunate" if it ends up playing "into the hands of the Far Right and others who don't want any action on climate change."

The agency's first black administrator, Jackson, 48, stresses that the EPA is moving forward with "modest" steps to cut carbon that will add up over time. When she oversaw environmental policy from 2006 to 2008 under then-Democratic New Jersey Governor Jon Corzine, she was similarly criticized by business groups for policies they found too aggressive, and by environmentalists who didn't think she was aggressive enough. "She found a good balance," Corzine says.

Even Senator James Inhofe (R-Okla.), a leading skeptic of man-made global warming, likes Jackson's style. "She's established her integrity and openness to Democrats and Republicans," says Inhofe, the senior Republican on the Environment & Public Works Committee. He was so impressed after meeting her that he gave her a holiday card of his family, which now sits, framed, on her office shelf. "I'm a firm believer in the value of talking to people, of working together no matter what the politics," says Jackson, a chemical engineer by training who grew up in New Orleans' Ninth Ward.

Former House Energy & Commerce Committee Chairman John Dingell (D-Mich.) has warned that attempts to use existing law to regulate carbon will create a "glorious mess." So far, he seems to be right. Still, Jackson is forging ahead. "There is only so much this agency can do under the Clean Air Act," she concedes. "You can get started, and we need to get started."

The bottom line: The EPA's Jackson is caught between powerful forces as she tries to assert her limited authority to cut carbon emissions.

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