- Thursday's ruling by the Supreme Court declared that it was beyond the scope of the EPA's authority to dictate that power generation be shifted from one source to another. But the EPA and state governments still have many tools in their arsenal.
- The ruling opens the door to more litigation, however, which could help the fossil fuel industry delay moves to decarbonize the economy.
- In the end, cheaper and more efficient clean energy may end up shifting the market faster than any government agency could.
On Thursday, the Supreme Court changed the rules of the game in the race to limit global warming by constricting the Environmental Protection Agency's authority to mandate carbon emissions.
Specifically, the court ruled in West Virginia v. EPA that it was an overreach for the EPA to dictate that power generation be shifted from one source, say, from coal to wind or solar, declaring such a mandate should only come from Congress.
"There is little reason to think Congress assigned such decisions to the Agency," Chief Justice John Roberts wrote in the 6-3 decision, which was joined by the other conservative members of the court. "The basic and consequential tradeoffs involved in such a choice are ones that Congress would likely have intended for itself."
The decision relied on a recent framework called "the major questions doctrine," which argues that governmental agencies are there to execute the will of the Congress and its elected leaders, not to decide those matters themselves. By regulating such massive components of the economy as how power is generated, the EPA was overreaching, the ruling said.
"The Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people's representatives," Justice Neil Gorsuch wrote in a concurring opinion.
Justice Elena Kagan wrote an excoriating dissent arguing that it's dangerous to take any power away from the EPA just when the United States — and much of the world — is missing its decarbonization targets. "If the current rate of emissions continues, children born this year could live to see parts of the Eastern seaboard swallowed by the ocean," Kagan wrote.
"Whatever else this Court may know about, it does not have a clue about how to address climate change. And let's say the obvious: The stakes here are high. Yet the Court today prevents congressionally authorized agency action to curb power plants' carbon dioxide emissions. The Court appoints itself — instead of Congress or the expert agency — the decisionmaker on climate policy. I cannot think of many things more frightening," Kagan wrote.
Nonetheless, while the court limited the EPA's authority, it did not render the agency impotent to address carbon emissions. It can still regulate the greenhouse gas emissions of a specific power plants, among many other things. States can also pass their own laws, although enforcement may be tricky.
In the meantime, while fossil fuel providers are seen as likely to use the decision to delay decarbonization and challenge future laws with litigation, clean energy is getting cheaper, which could accelerate the move away from fossil fuels without government intervention.
EPA Administrator Michael S. Regan said in a statement on Thursday he is "deeply disappointed by the decision," but added the agency "will move forward with lawfully setting and implementing environmental standards that meet our obligation to protect all people and all communities from environmental harm."
"This is a narrow technical and procedural ruling that has relatively limited effects on EPA's general authorities," Gilbert told CNBC. "The court left the door open for the Biden administration to set standards using site specific opportunities, as well as other systemic ways to reduce emissions that do not require generation shifting."
Mandating coal plants to maximize their efficiency could reduce greenhouse gas emission by 10% to 15%, according to Eric Schaeffer, executive director of the Environmental Integrity Project, a nonprofit, nonpartisan organization that aims to strengthen policy to protect public health and the environment.
Also, the EPA could still mandate emissions reductions by implementing standards that require coal plants to be retrofitted to burn natural gas, Schaeffer told CNBC. Burning natural gas generates about 40% less carbon dioxide than coal to create the same amount of power, according to the U.S. Energy Information Administration.
Carbon capture and sequestration technologies could also help existing plants minimize their greenhouse gas emissions at the plant level, Schaeffer said, but that technology is still prohibitively expensive.
"EPA has to take costs into account when setting standards for carbon emissions from power plants," Schaeffer told CNBC. "Requiring carbon sequestration for existing plants isn't likely to pass muster, because it's very expensive so that's unlikely to be the basis for any revised standards."
If the agency forced coal plants to retrofit to natural gas or implement carbon capture, it could end up shutting them down, speeding the transition to renewables. "The compliance costs are too tough to handle for major facilities," Gilbert told CNBC.
Schaeffer also agrees that the high court still left the EPA chances at meaningful action.
"The Court at least made clear that EPA can impose carbon emissions on specific power plants that are based on efficiency improvements and fuel switching. That approach could actually result in fairly stringent limits," Schaeffer told CNBC.
Beyond the EPA, state governments can mandate emissions targets, says Jennifer K. Rushlow, Director of the Environmental Law Center at Vermont Law School.
"Quite a few states now have economy-wide greenhouse gas emissions limits, often called Global Warming Solutions Acts," Rushlow told CNBC. California and Massachusetts were the first states to pass such GWSA laws, she said.
Enforcing these state GWSA laws can be tricky, though.
"In many states these laws are not clearly enforceable by third parties, and so if the state fails to take sufficient action, the laws become simply aspirational. In limited instances, enforcement has been possible, however," Rushlow said.
She speaks from experience, having litigated a case in Massachusetts, Kain v. Department of Environmental Protection, which was successful in getting the state to take action reducing greenhouse gas emissions. Vermont also has a GWSA.
"If state GWSAs can have this kind of teeth, they stand a real chance of making change," Rushlow told CNBC. "Although, of course, climate change is a global problem, so we need more than a few states following through on these commitments."
The ruling may not be as dire as it could've been, but experts believe it could help the fossil fuel industry delay moves to decarbonize the economy by paving the way for them to challenge new regulations in court.
"I'm decidedly of two minds here. On the one hand, yes, this is a rather narrow ruling, at least relative to what could have happened. That's the silver lining and partial good news of the day," Gernot Wagner, climate economist at Columbia Business School, told CNBC.
"On the other hand, the fossil industry — coal interests, really — knows that they are losing the war. All they are banking on is anything that helps delay the inevitable. And yes, this ruling does limit regulatory options and hands coal plants yet another tenuous lifeline."
In particular, the ruling opens the door to more litigation, which will inevitably delay decarbonization.
"More importantly, of course, this isn't the end here. Any EPA regulation — any legislation, too — will be litigated. All of these delays will add up, and the same will hold true: Any delay is a win for fossil/coal interests and a loss for everybody else," Wagner said.
"So yes, EPA can regulate coal itself, which will make coal (even) more expensive and might lead some companies to exit coal as a result. But any time that happens, the plant will presumably cry foul, sue, and courts will (presumably) agree and interpret the SCOTUS ruling as saying that regulation can't be too burdensome, lest it leads to fuel switching — and we're back at the beginning."
While government action is still necessary to reduce carbon emissions in the long run, private markets may force the issue in the near term. That's because clean energy is rapidly becoming the cheapest form of energy, says one expert.
"I don't think this decision will be as important for the electric industry in the long run as many people believe. The private sector is already demanding low-carbon energy, and lower carbon sources — whether renewables or natural gas — are very cost-competitive," Michael P. Vandenbergh, environmental law professor at Vanderbilt Law School, told CNBC. "We can get a billion tons in greenhouse gas emissions reductions from the private sector every year, an amount equal to Germany totally eliminating its emissions."
Vandenbergh is optimistic about the future, in part because he hasn't expected meaningful action on climate change to come from the federal government anyway.
"I predicted that government would not do enough roughly a decade ago, so I've been spending the last decade developing two principal alternatives that are designed to reduce emissions even without major federal action," Vandenbergh told CNBC. He sees change coming from the private sector and increasing consumer demand for sustainable alternatives. "We can get roughly a half billion tons from increasing household energy efficiency," Vandenbergh told CNBC.
"These are not a solution, but they can buy time for the voters to overcome the barriers against federal government action," Vandenbergh said.