Supreme Court Upends EPA’s Broad Claims of Climate Regulatory Authority

The Court’s reasoning

The Court held that Congress did not authorize EPA in Section 111(d) of the Clean Air Act (CAA) to regulate GHG emissions through the CPP, which would have reduced emissions by imposing caps on emissions and required utilities and other providers to shift electricity production from coal-fired power to natural gas and then renewable energy.

Major Questions Doctrine. The Court reached its conclusion based on the “major questions doctrine,” which it said applies where the “history and the breadth of the authority” that the agency has invoked and the “economic and political significance” of that assertion provide a “reason to hesitate before concluding that Congress” granted that authority to the agency. According to the Court, in those circumstances, there must be clear authorization from Congress before the agency may exercise the claimed authority. 

Here, the Court found that in CAA § 111(d), Congress had not clearly authorized EPA to impose its generation-shifting regulatory scheme. According to the decision, EPA’s CPP would have substantially restructured the American energy market and thus could not have been authorized by the “vague language” in a rarely used, “ancillary” “gap filler” provision like CAA § 111(d). Moreover, Congress had repeatedly considered, but failed to enact, various sweeping amendments to the CAA to address GHG emissions. That would have been unnecessary if EPA already had that type of authority within CAA § 111(d). 

Further, the Court found that EPA’s broad generation-shifting approach was inconsistent with past application of CAA § 111(d). EPA had previously set emissions limits under CAA § 111 based on application of technology to improve emissions at individual sources rather than by the systemic approach of the CPP. The Court concluded that Section 111’s reference to the “best system of emission reduction” did not encompass an approach like the CPP; had Congress intended to provide an expansive regime of generation shifting and emissions trading under CAA § 111, it would have done so, as it has in other CAA provisions providing for trading regimes.

Concurring Opinion. In concurring with the majority opinion, Justice Neil Gorsuch (joined by Justice Samuel Alito) sharpened the focus on the “major questions doctrine,” explaining that it requires administrative agencies to point to a clear congressional authorization before acting on major economic and political questions and questions that touch on areas traditionally controlled by the states.

Dissenting Opinion. Justice Elena Kagan, joined by Justices Stephen Breyer and Sonia Sotomayor, dissented, criticizing the Court for overriding Congress’s choice to grant EPA the power to curb GHG emissions. Emphasizing Congress’ charge to EPA to address climate change risks as the “primary regulator of greenhouse gas emissions,” the dissent highlighted that Congress’s broad authorization to EPA to select the “best system of emissions reduction” contains no limits relevant to the question before the Court and that there is no dispute that generation shifting is the “best system” to reduce emissions. The dissent further disagreed with the Court’s analytical approach as creating a novel, more stringent statutory interpretation doctrine in the form of the “major questions doctrine” and criticized the Court for taking the case, despite the Biden administration’s announcement that it would issue a new rule rather than implement the CPP.

Key takeaways

1. EPA’s CAA § 111(d) authority is limited. The Court made clear that the CPP exceeded EPA’s authority to regulate existing sources under CAA § 111(d) by going beyond traditional regulation at the source in question. In any future § 111(d) rulemakings, EPA will need to think carefully before imposing any “best system of emissions reduction” that goes beyond controls or procedures directly tied to reducing emissions at an individual source. That said, the opinion did leave the door open a crack by saying the decision does not decide that source-specific measures are the exclusive measures EPA may impose.
2. Regulation of GHG emissions limits is preserved. The decision does not upend Massachusetts v. EPA or wade directly into EPA’s general authority to set emission limits on GHG emissions, and that authority remains intact. However, the Court’s close review of the scope of congressional direction given to EPA in the statute suggests future potential court battles over creative EPA regulatory provisions. Stakeholders should expect further EPA efforts to regulate GHG emissions — and debates over whether the tools EPA chooses are properly authorized under the CAA.
3. The states will play a significant role in future regulations. States will continue to be key players. On the one hand, states that oppose EPA regulatory efforts will — armed with this ruling — have an additional basis for opposition. On the other hand, when EPA steps back or is pushed back by the courts, states that support more regulation often double down on their efforts. For example, California and other states that have already implemented their own cap-and-trade programs may feel compelled to further enhance their own efforts to reduce GHG emissions in the power, transportation, and other sectors.
4. Courts may engage in closer scrutiny of agency actions and afford less judicial deference. As noted, the Court based its ruling on the “major question” doctrine, not on deference to an agency interpretation pursuant to the Chevron doctrine. However, the Court’s opinion, coupled with last week’s decision in Becerra v. Empire Health, illustrate that the Court is increasingly unwilling to afford deference in evaluating whether an agency has acted within the scope of its authority. 

According to EPA’s most recent regulatory agenda from earlier in June, the agency plans to proceed with a rulemaking to address GHG emissions from the power sector by March 2023, although given the scope of the Court’s decision, this timeline may slip. Moreover, many other rules have been issued or are in development to address GHGs. In fact, in response to the Court’s decision, Administrator Michael S. Regan announced that “EPA will move forward with lawfully setting and implementing environmental standards that meet our obligation to protect all people and all communities from environmental harm.” Thus, stakeholders should bear in mind that today’s decision does not end the Biden administration’s efforts to regulate GHG emissions.