West Virginia v. EPA: Changes on the Road to GHG Reductions
August 1, 2022
By: Mark Hall
In a 6-3 decision last month, the Supreme Court ruled against the Environmental Protection Agency (EPA) which had proposed to set up a program to regulate greenhouse gas (GHG) emissions from power plants, in a manner that would have required “restructuring the Nation’s overall mix of electricity generation to transition from 38% to 27% coal by 2030”.
The court ruled that the EPA was not granted authority under Section 111(d) of the Clean Air Act (CAA) to enact a “regulatory scheme” of the best system of emission reduction to limit CO2 emissions without clear authorization from Congress. The proposed requirements were part of the EPA’s Clean Power Plan (CPP), which introduced a novel pollution reduction strategy called “generation shifting.” Generation shifting would have involved increasing use of natural gas and renewable energy and, correspondingly, decreasing use of coal-fired power plants.
Important Considerations Regarding the Major Questions Doctrine
This ruling does not eliminate the ability of the EPA to regulate GHGs but more narrowly focuses on the types of strategies that EPA can use without more explicit authority from Congress. A notable element of the Supreme Court’s majority opinion is the inclusion and application of the so-called “major questions doctrine” which limits the ability of administrative agencies to make decisions of broad “economic and political significance”. If the Court applies this doctrine in other cases, it could limit the flexibility and creativity of EPA as well as other executive branch agencies.
While the majority of Americans are supportive of taking more action to reduce GHG emissions, this decision demonstrates that the means to make those reductions will be scrutinized and challenged at every step. The case was joined by 17 states and the Supreme Court will likely be open to similar challenges to environmental rules that states might bring. Those future cases notwithstanding, the EPA retains the authority to regulate greenhouse gas emissions from power plants and other sources of GHG emissions. In a press release following the court’s ruling, the EPA Administrator said “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.”
The window to curb the climate crisis is narrowing, the latest IPCC report indicates that our global society has eight years to take substantial actions to keep the planet in a temperature range that humans can adapt to. Emissions from the U.S. have impacts beyond our borders. With the EPA forced to take a more cautious route, international regulators and financial markets may take more bold actions.
The impacts of the ruling are only starting to be felt but we see a couple of early actions that should be considered. First, many states will act more aggressively if the federal government can’t or won’t. In some cases, this will make it more difficult for the regulated communities that operate in multiple states and have to navigate different requirements in those states. Second, with ESG considerations on the minds of investors and other stakeholders, voluntary actions were already starting to outpace regulatory requirements. This ruling will likely increase public pressure on individual companies to make commitments and take measurable steps to reduce GHG emissions which will take varied forms. While we may see other federal environmental rulemakings challenged, we don’t see a significant retrenchment coming with regard to the multiple pathways available to achieve significant GHG reductions. The market is expected to take a larger role in dictating minimum activities to meet international and corporate climate goals. Companies may not face regulatory penalization from the EPA, but the risk of stranded assets will continue to push the energy transition forward.
Mark leads our Advisory Services Team, supporting our oil & gas, manufacturing, renewable energy and power generation clients with management consulting support to assist in developing world class strategies to address their biggest environmental and sustainability challenges. With over 30 years of experience in a variety of senior executive and leadership roles with both public and private power generation and renewable energy companies, as well as consulting/engineering firms, Mark’s corporate responsibilities have included strategic planning, EH&S programs, government affairs, marketing & communications, investor relations and business development. Mark is active in several trade associations and was a founding board member and past chair of the US Combined Heat and Power Association where he testified before Congress and organized and chaired three international conferences. He holds a Master’s degree in Environmental Science from Indiana University, and a Bachelors of Arts in Chemistry from Austin College.