This Article explains that the conventional view of agency behavior—following the specific direction of the U.S. Congress or the president and using notice-and-comment rulemaking or adjudication processes—does not capture how public agencies and private entities develop innovative regulatory strategies and earn regulatory authority as a result. In particular, this Article explains how governmental agencies like the U.S.

For more than a century, energy rate setting has been used to promote public good and redistributive goals, akin to general financial taxation. Various non-tax subsidies in customer energy rates have enormous untapped potential for promoting low-carbon sources of energy, while also balancing broader economic and social welfare goals. This Article argues that, even though a carbon tax remains politically elusive, “carbon taxation by regulation” has begun to flourish as a way of financing carbon reduction.