In early April, the U.S. Supreme Court handed down two landmark environmental decisions. The decisions are bound to change the legal landscape surrounding emissions regulation. The first gives the Environmental Protection Agency (EPA) a direction to regulate greenhouse gas emissions. The other sends a rebuke to the owners of dirty coal-fired power plants. Both, however, provide immediate support for agencies and companies looking to invest in renewable and alternative energy sources.
In the most publicized case, Massachusetts v. Environmental Protection Agency, 12 states and other private environmental organizations challenged the EPA’s ability to decide on its own what emissions to regulate. They argued that the EPA should be required to regulate carbon dioxide and other greenhouse gas emissions from motor vehicles.
The states argued that carbon dioxide—the primary greenhouse gas considered to cause climate change—is a “pollutant” under the Clean Air Act (CAA). The EPA, on the other hand, contended that 1) greenhouse gases are not pollutants, and 2) even if they were, it had broad discretion over whether to regulate them.
The Supreme Court disagreed with the EPA. In its 5-4 opinion, the Supreme Court noted that the CAA’s sweeping definition of “air pollutant” encompasses carbon dioxide and other greenhouse gases. Thus, the EPA wrongly concluded that greenhouse gases were not “air pollutants.” Significantly, the Court held that the EPA can only decline to regulate greenhouse gases if 1) it determines that greenhouse gases do not contribute to climate change, or 2) it provides some reasonable explanation why it cannot or will not exercise its discretion to determine whether they contribute to climate change. Applying the new standard, the Supreme Court majority determined that the EPA did not adequately justify its decision not to regulate greenhouse gases. It sent the case back so that the EPA could rethink its reasons for action or inaction under the CAA.
On the same day it issued this landmark ruling, the Supreme Court released its decision in Environmental Defense Fund v. Duke Energy Corporation. This second case interpreted how emissions increases should be measured when utilities upgrade or modify their aging power plants. The Supreme Court rejected the industry’s preferred approach of measuring emissions hourly. The hourly system allows utilities to avoid installing pollution controls as long as their hourly emissions do not rise, even if annual pollution totals increase as modernized plants operate longer hours. The Court rejected this approach. Now, companies must obtain a permit to effect changes in a power plant that may contribute to air pollution, and permits must be based on annual, not hourly, pollution levels. As with the first case, the Court sent this case back to the lower court for further proceedings.
Regardless of the final outcome of each case, the Supreme Court’s decisions will have important business ramifications, particularly since they are expected to boost the market for energy alternatives. The EPA will likely be forced into rulemaking regarding carbon dioxide from tailpipe emissions, based on the Court’s conclusion that carbon dioxide is an air pollutant. This will, in turn, increase the pace with which the United States changes to cleaner-burning fuels and more fuel-efficient automobiles. In addition, the large costs to be incurred by electric utilities in having to retrofit older power plants with anti-pollution devices will likely be reflected in increased rates, making alternatives such as solar, wind, biomass, and clean coal technology more competitive. Fortuitously, the Court’s decisions were issued just prior to the release of a Gallup poll indicating that a record high number of Americans (almost 80% of respondents) favor higher emissions standards for automobiles, industrial pollution, and greenhouse gases. These statistics clearly demonstrate public support for stronger environmental regulation. Thus, regardless of whether the pressure to implement sound energy policies is regulatory or industry-driven, businesses can feel confident investing resources in renewable and alternative energy sources.
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Scott Mooney is an associate with the litigation and environmental practice groups at Boylan Code, LLP. You may reach him at 585-232-5300 or via e-mail at smooney@boylancode.com.
