July 8, 2022 - Sustainability Decoded Newsletter

What Now? Climate policy after West Virginia v EPA

The dust is still settling from last week’s precedent-busting Supreme Court decision on West Virginia v EPA. As the verdict becomes clearer, there are many articles and podcasts describing its implications on the battle against climate change, on the power of the Environmental Protection Agency (EPA) and on other federal regulations. As a recap, last week the Supreme Court of the United States (SCOTUS) ruled that the EPA (the US Federal Agency tasked with regulating greenhouse gas emissions) had overstepped its authority with its plans to restrict carbon emissions from American power plants.

The details and legal arguments surrounding the West Virginia ruling are best left to legal scholars and pundits. For our dear readers, we prefer to focus on how the global movement towards a low carbon economy will continue and what's likely to happen next.

It Could Have Been Worse

The headline “The US Supreme Court EPA ruling is really bad, but here’s why all is not lost” said it all. Because the conservative majority of Supreme Court justices were more focused on limiting federal authority than climate change, they left many options for the EPA and the Administration to continue climate action. 

At the national level, the EPA will “have to find creative ways” to mitigate GHG emissions “with the authority it has left,” in the words of Gina McCarthy, the White House National Climate Advisor and former EPA Administrator under President Obama. Even after the ruling, the agency will continue to regulate power plant emissions with site-level regulations or by implementing efficiency requirements that require coal plants to be retrofitted or shut down. The EPA will also continue regulating the energy sector’s other environmental impacts such as water use, air pollution, and waste and these actions often curtail greenhouse gas emissions as well. 

Beyond the EPA, McCarthy cites the broader array of options the Biden administration has at its disposal to fight climate change as reason for optimism. “During the Obama Administration, it was so much earlier on in the climate challenge … and the options were limited,” McCarthy noted. The Administration now has tools ranging from recent offshore wind investment to the use of the Defense Production Act for solar manufacturing to bolster its arsenal in the fight against climate change. 

SCOTUS Against The World

Despite global dismay at the ruling, the international community is forging ahead with decarbonization. And it is not only coming from places we would expect, like the EU. Brazil, the world’s 7th highest emitter, has become the first nation to declare the Paris Agreement as a human rights treaty, which may spur other nations to do the same and instigate climate action. In addition, India has pledged to increase their renewable energy output by 500GW, which would cut almost half its coal use. 

Time to Step Up

The ruling underscored the importance of following through on the “net zero” pledges from companies, financial firms and state governments. In an interview with the New York Times, former Vice President Al Gore highlighted the need for “state and local governments to redouble their efforts to reduce emissions” and for companies to “match their climate pledges with action” in the wake of the ruling. To fulfill these pledges, companies will increase demand for low-carbon energy from power plants, adding market pressure for the green energy.

Clean Energy Trends Will Continue, But How Quickly?

The SCOTUS decision is unlikely to impact the transition to a low-carbon US energy grid. Duke Power, which generates 58,200 megawatts of electricity distributed to its 7.2 million US customers, came forward after the decision saying: “We don’t really see that there would be any immediate impact on our transition plans. We still plan to transition out of coal by 2035 and we don’t see the Supreme Court’s decision having a material impact on that.”

Richard Lazarus, a Harvard University environmental law professor said: “The utilities will not build new coal-fired power plants” But, he warned, “the question is no longer whether the way we produce energy will be fundamentally transformed, but how quickly that will happen. And, for the climate issue now, the pace of change may well be the ballgame.”

Another State of Mind

The federal ruling won’t stop progressive states from enacting their decarbonization strategies and will likely spur them on. Representatives from Oregon and California both say that after the Supreme Court decree, state policies and regulatory agencies now play an even more critical role in the fight against climate change.

California’s Governor Gavin Newsom doubled down on California’s commitments saying, “[The] ruling makes it even more imperative that California and other states succeed in our efforts to combat the climate crisis." For context, if California were a country, it would be the sixth largest economy on the planet.

Other states like Arizona are worried about the implications on their renewable energy plans as power companies may slow their transition to solar generation. As Arizona continues to set extreme heat records, officials and citizens are worried about the livability of their state. 

Is the SEC Climate Disclosure Rule next?

The ink wasn’t dry on the ruling when conjecture started over its possible impacts on the SEC’s proposed climate disclosure rule. The SEC’s statutory authority to require climate disclosure has been hotly debated and the new ruling gives opponents another legal strategy to threaten the rule. 

Some of the comments on the proposed rule define the sides of this debate. A group of 30 law professors submitted a comment letter to the SEC arguing that the rule is squarely within the SEC’s authority under the 1933 Act that formed the Commission. But others, like former SEC Chairman Richard Breeden and four former SEC commissioners, argued that a rule requiring “disclosure of … vast quantities of immaterial information” oversteps the SEC’s congressionally delegated authority and attempts to implement by rulemaking a scheme that Congress has considered and rejected.

Speculation is running high that the “major questions doctrine” underlying the West Virginia decision may be used to upend other protections like fuel efficiency rules for cars and energy policy to name a few. Given that this court has already used its new doctrine to roll back pandemic remedies like eviction moratoriums and vaccine mandates, we could be in for a wild ride. Get the popcorn…and the tissues...

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