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With the anticipated finalization by EPA of its "endangerment finding" for greenhouse gases the agency has triggered action to regulate CO2 and other heat-trapping gases under the Clean Air Act. With this move, President Obama has created a set of responsibilities and obligations, as well as a range of options and powers to control emissions. The questions now are: What road will he take? Will he be met by success or setbacks? 

This report offers an in-depth analysis of the relationship between the EPA and Congress. If EPA pursues traditional "command-and-control" regulation under the Clean Air Act, it may set itself on a collision course with Congress, which has been moving to design "cap-and-trade" legislation. If EPA adopts mandatory control regulation and Congress later enacts a cap-and-trade system, there will be significant and unnecessary transition costs for the American economy. Under the Clean Air Act, however, EPA gas a great deal of flexibility to design regulatory programs. It must use that flexibility wisely to avoid a conflict with Congress.

If Congress fails to act, President Obama has the power under the Clean Air Act to adopt a cap-and-trade system that auctions greenhouse gas allowances. President Obama also has the power under the Clean Air Act  to implement an executive agreement at the international level, rendering Senate approval of a climate treaty unnecessary. EPA's first priority must be to meet its legal obligations without impeding the work being done in Congress. But if Congress fails to act decisively, then putting those powers to use will be an essential stop-gap to avoid complete inaction on climate change.