Supreme Court restricts EPA regulation of greenhouse gas emissions

Concluding a blockbuster term, the Supreme Court issued West Virginia v EPA, an environmental and administrative law decision limiting EPA’s authority to regulate greenhouse gas emissions from power plants.  Most directly, the Court rejected EPA’s aggressive attempt to significantly limit carbon dioxide emissions from power plants using an unprecedented systemic approach.  Beyond sending EPA back to the drawing board in a decade-long effort to accelerate carbon emissions reductions from power plants, the decision calls into question the scope of EPA’s authority to regulate greenhouse gas emissions.  West Virginia also may augur fundamental change in the power of executive agencies and the federal administrative state.

Summary

The federal Clean Power Plan (CPP), finalized in 2015, sought to reduce existing power plants’ carbon-dioxide emissions and mitigate climate change by forcing a shift in power generation from higher emitting sources (eg, coal-fired power plants) to lower emitting sources (eg, solar and wind power).  Asserting sweeping power to regulate the energy industry under an expansive reading of its authority under the Clean Air Act, EPA aimed to curb carbon emissions by compelling power producers to engage in such “generation shifting” across their systems.  The CPP’s unprecedented approach would apply emissions requirements to a producer’s entire generating system instead of applying specific limits to each individual source, thereby catalyzing a transition to lower carbon emission sources.

The Supreme Court rejected the CPP as exceeding the authority granted to EPA by Congress under the Clean Air Act.  Writing for the 6-3 majority, Chief Justice John Roberts determined that EPA had impermissibly relied on a rarely used, ancillary “backwater” provision of the statute (CAA Section 111(d)) to “adopt a regulatory program that Congress had conspicuously and repeatedly declined to enact itself.”  The Court noted that, previously, EPA had used that provision exclusively to prescribe emissions limits for specific categories of existing generation sources.  In contrast, the CPP sought to transform the overall power generation system “by shifting polluting activity from dirtier to cleaner sources,” with far-reaching consequences for the nation’s electricity generation mix and potentially for power transmission, distribution and storage.

Expressly adopting for the first time a “major questions” doctrine, the Court broadly held that, in “extraordinary cases” involving executive agency assertion of expansive power having “economic and political significance,” the question of whether Congress granted that power to the agency will be subject to enhanced and more demanding judicial review:  Any such delegation of power must be supported by “clear congressional authorization.”  Applying the doctrine to EPA’s assertion of broad power over the energy industry and federal energy policy in the CPP, the Court held that CAA Section 111 provides no such clear authorization.

Effects and implications

Immediate effect on federal efforts to mitigate climate change through GHG emissions reduction

West Virginia is a major environmental decision that rejected an EPA attempt to accelerate reduction of GHG emissions, and it may be a harbinger of further limits on EPA power and discretion in other contexts.  However, the direct and immediate effect of West Virginia on EPA’s regulatory power to reduce GHG emissions may not be as significant as some have predicted.  The specific holding of the case applies only to the CPP and its particular  “generation shifting” approach.  The majority opinion emphasized that it was not ruling that EPA was limited to individual source performance standards in regulating existing power plant emissions under Section 111.  The decision thus prohibits EPA from using a novel and potentially powerful regulatory tool, but does not preclude the application of other “system[s] of emission reduction” authorized by the statute.  Nor does the decision prevent the Agency from directly applying more stringent emissions limits on “dirtier” sources based on “adequately demonstrated” technologies.  Post-decision statements of President Biden and high-ranking Administration officials make clear that they intend to continue to use all available authority and tools to reduce GHG emissions.

The Court did not suggest – in this decision – that it was reconsidering EPA’s authority to regulate GHG emissions.  Fifteen years ago, in Massachusetts v EPA, the Supreme Court held that EPA had the authority and responsibility to address GHG emissions.  Neither the majority nor the concurring opinion even mentioned, let alone questioned, that decision.

Watershed for administrative law and the modern administrative state?

As significant as West Virginia is for climate change regulation, its implications for federal regulation in general may be even greater. Without even mentioning Chevron v NRDC, the Court adopted a new doctrine creating a largely undefined exception to Chevron’s rule of deference to reasonable agency interpretations of the law.  The most cited and relied-upon federal administrative law decision of the last half century, Chevron is a cornerstone of the modern federal administrative state.  The majority opinion establishes no clear or objective limits to the new exception, suggesting that it applies when an agency exercises broad power having “economic and political significance.”

The decision seeks to protect the constitutional power of Congress from usurpation by the less democratically accountable Executive.  Arguably, however, the major questions doctrine creates a different separation of powers issue by vesting the Judiciary – the least democratically accountable branch – with a new policymaking power and discretion to determine which Executive agency actions are sufficiently important to warrant enhanced scrutiny and a more demanding standard.

The amorphous new exception provides a new basis to challenge many federal agency regulations and likely will spawn much new litigation.  It also could set the stage for sidelining or overruling Chevron and its principle of deference to reasonable agency interpretations when statutory text is not clear. 

The majority and concurring opinions also suggest potential revival of the Depression-era “non-delegation” doctrine.  Modern regulation is complex, and its development is time-and-resource-intensive.  As currently constituted, Congress could not have established the detailed and specific regulations promulgated by federal agencies and likely would not be able to do so in the future.  Alone or in combination, dilution of Chevron deference and application of a strict non-delegation doctrine could have profound implications for federal regulation and the federal administrative state as it has developed since the Great Depression.

What’s next for GHG regulation and climate policy in the US?

West Virginia, and the 6-3 Court majority it commanded, may portend a changed legal environment for regulation of GHG emissions and other US efforts to forestall climate change.  The administrative and constitutional law implications discussed above could significantly limit the power of EPA and other federal agencies to regulate in those areas.  Outlined below are some potential implications for government regulation of GHG emissions signaled by West Virginia and other recent Supreme Court decisions. 

Federal regulation

• Federal authority to regulate GHG emissions. None of the justices forming the 5-4 majority in Massachusetts remain on the Court. Three of the dissenters are sitting justices, forming half of the conservative majority in West Virginia.  At least five members of that same majority have demonstrated a willingness to overrule established precedent with which they disagree.  If Massachusetts were overruled on the merits in accord with Justice Antonin Scalia’s dissent in that case, EPA would lose CAA authority to regulate GHG emissions.
• Congressional action unlikely.  In the current political environment, congressional action to clarify or modify EPA’s authority to regulate GHG emissions appears unlikely.  Congress has not made major amendments to the Clean Air Act in over 30 years, and national politics have become much more polarized in the interim.  At least in the near term, there is little prospect for significant federal CAA legislation that could pass both Houses of Congress and be signed into law by the President.
• Mobile source GHG emissions regulation. Assuming Massachusetts remains in place, other court challenges to how EPA regulates GHG emissions may multiply, as West Virginia could make them more viable.  For example, in State of Texas v EPA, a coalition of states, corn and soybean growers, and fuel manufacturers are challenging in the DC Circuit EPA’s GHG emissions standards for cars and trucks slated to take effect in model year 2023.
  
  Invoking the major question doctrine adopted in West Virginia, Petitioners contend that EPA exceeded its authority by effectively requiring a shift from internal combustion engines to electric power trains for vehicle propulsion.  However, the statutory provision, context and history of CAA mobile source regulation differ from those of Section 111(d), so it is not clear whether this sort of challenge would prevail absent overruling of Massachusetts.
  
  
• Indirect federal regulation of GHG emissions, such as the SEC’s proposal to require disclosure of GHG emissions and related information or FERC’s consideration of GHG emissions in reviewing proposed natural gas projects, could also be subject to challenge under West Virginia.

State regulation

• Challenges to California’s authority to impose more demanding GHG limits may have new vitality in the wake of West Virginia.  The Supreme Court has never ruled on federal waiver of state law pre-emption that allows California and following States (CAA §§ 209(b) and 177) to impose more stringent limits on GHG emissions than those required by federal standards.  An EPA waiver for GHG emissions is arguably inconsistent with the statutory provision authorizing waivers.  State regulation of tailpipe emissions also may be pre-empted by NHTSA’s exclusive authority to regulate vehicle fuel economy.
• Increased state regulation? It is also possible that some states could seek to more actively regulate GHG emissions, potentially creating a patchwork of divergent or inconsistent regulations for companies operating or selling products or services in multiple states.  While the majority opinion only briefly mentions a separation of powers rationale, Justice Gorsuch wrote separately to explain the “constitutional guarantees” supporting the decision and the major questions doctrine.  Gorsuch’s concurrence opined that the major question doctrine was also necessary to protect federalism – that is, to preserve lawmaking power for state governments and allow them to act as laboratories of democracy.  Elsewhere, Justice Thomas and others have expressed skepticism about the expansive reach of the federal Commerce power, the primary basis for federal environmental regulation. Whether the Court ultimately would allow States to more actively regulate GHG emissions remains to be seen, but it is not outside the realm of possibility.

What’s next for Greenhouse Gas Regulation in the US?

Climate change is not going away, and governments will continue their efforts to arrest its advance. Both supporters and opponents of government regulation of GHG emissions and other “decarbonization” efforts to combat climate change may intensify their activity.  The Supreme Court majority appears open to addressing federal government authority to address climate change, and stakeholders may expect increased litigation aimed at establishing the metes and bounds of government regulation in this area.  And the amorphous “major question” doctrine may unleash a torrent of litigation challenging federal agency regulation.  Stay tuned.