What the case is-and what it’s not
by Bethany Bryant
The nation has embarked on the largest capital campaign for new power generation resources in its history. With no national template for how to build needed facilities and no standard regulatory regime to absorb the accompanying costs, however, the course for meeting increasing demand for capacity is still largely uncharted. In April, the U.S. Supreme Court added environmental uncertainty to the existing regulatory conundrum by establishing, in a landmark decision, the EPA’s authority to regulate greenhouse gases (GHGs).
The Supreme Court’s 5-4 ruling in Massachusetts v. Environmental Protection Agency arose from a petition brought by several states and private organizations asking the EPA, pursuant to its authority to protect the public health under the Clean Air Act, to regulate automobile emissions of carbon dioxide and other GHGs. Previously, the EPA had disclaimed authority to regulate GHGs under the Act, arguing that climate change should be addressed by the president’s comprehensive program rather than by piecemeal regulation. The Supreme Court reversed the DC Circuit’s affirmance of EPA’s position, finding EPA’s actions to have been arbitrary and capricious, and remanding to the agency for a reasoned explanation of its refusal to act. In essence, the Court held that, having acknowledged that GHG emissions are causally connected to climate change, the EPA could not decline to address the ramifications of that connection without explanation. The chief justice’s dissent, joined by three other justices, would have dismissed the case for lack of standing.
In weighing the case’s significance, it is important to keep in mind what the case is not-a harbinger of immediate and expansive regulation of electric generation emissions. To begin with, the decision applies only to automobiles, and the EPA has stated that it is too soon to say whether it will be applied to other industries, so it’s doubtful that regulations targeting GHG emissions by fossil-fuel power plants will be issued anytime soon, particularly given this administration’s claim that it’s already appropriately addressing the issue of climate change.
However, Massachusetts v. EPA undoubtedly is a watershed case, if only as a crystallization of many of the issues in the new debate over climate change. Justice Stevens, writing for a plurality, recognized climate change as a “well-documented” phenomenon, analyzed by “respected” scientists and posing “serious and well-recognized” harms. In this way, the opinion echoes the national debate on climate change regulation, which has shifted from “if” to “when” in recent years. And with the “when,” of course, comes a legion of other considerations: how much, how soon, by whom and, even generally, how?
No doubt, we should expect intensified congressional debate, more climate change cases in the lower courts, and more state and local initiatives. States like California that already have enacted climate change programs surely will be emboldened in their efforts and others likely will follow suit. Indeed, while major federal climate change legislation will likely not be enacted anytime soon, the decision surely deals a new and powerful card in the emerging debate: a future administration could regulate GHGs under current law, without the need to seek new legislative authority.
The decision poses the most questions, however, for the future of coal-fired generation. In addition to the uncertainty surrounding the choice of regulatory framework (competitive procurement versus rate-based utility assets) there is now an enormous question mark as to the environmental regime that will apply. Will it be a federal or a state-based program? Will it be market-based or “command and control”? What will be the permissible role of coal-fired generation-traditional or IGCC-in the decades to come?
In sum, Massachusetts v. EPA has resolved but one critical issue in the climate change debate, and further underscores the need for legislative and regulatory certainty as the nation embarks on the largest power plant construction program in its history.
Bethany Bryant is an energy associate and Richard Lehfeldt is an energy partner with Dickstein Shapiro LLP. They can be reached at firstname.lastname@example.org and email@example.com, respectively.