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U.S. Supreme Court's Historic Decision on Regulating Greenhouse Gases Expected to Impact Many Industries
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June 11, 2007
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By Geoffrey H. Yost and Samuel J. Maselli
Thelen LLP
In an historic, 5-4 decision, the U.S. Supreme Court clarified the authority of the Environmental Protection Agency to regulate greenhouse gas emissions pursuant to the Clean Air Act. The Supreme Court held not only that the EPA has the authority to regulate greenhouse emissions from new motor vehicles but that the Clean Air Act requires the EPA to regulate emissions if it finds that greenhouse gases "may reasonably be anticipated to endanger the public health or welfare."
The EPA had declined to regulate greenhouse gas emissions, and the states were divided as to whether to address these climate control issues on their own. The court rejected the EPA's arguments against regulating carbon dioxide emissions. Instead, it ruled that greenhouse gases fall within the definition of air pollutants and that the law directs the EPA to adopt emissions standards for "any air pollutant." Massachusetts v. Environmental Protection Agency, No. 05-1120. Although the Supreme Court's ruling does not require the EPA to regulate emissions, the Bush administration, having publicly acknowledged the dangers of greenhouse gases, now has promised to ask the EPA to issue greenhouse gas regulations for the auto industry by the end of 2008.
Issues Presented
Section 202 (a) (1) of the Clean Air Act, codified at 42 USC §7521 (a) (1), requires the EPA administrator to set emission standards for "any air pollutant" from motor vehicles or motor vehicle engines "which in his judgment cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare." The specific questions before the Supreme Court were:
|  | Whether the EPA administrator may decline to issue emission standards for motor vehicles based on policy considerations not enumerated in §202 (a) (1).
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| | Whether the EPA administrator has authority to regulate carbon dioxide and other air pollutants associated with climate change under §202 (a) (1).
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Case Background
The case originated in 1999 when a group of 19 private organizations filed a rulemaking petition with the EPA requesting that it set regulatory standards for four greenhouse gas compounds emitted by motor vehicles: carbon dioxide, methane, nitrous oxide and hydrofluorocarbons. The petition asserted that such emissions were "air pollutants" that "may reasonably be anticipated to endanger public health or welfare" and that must be regulated under §202 (a) (1) of the Clean Air Act because of their climate change effects. 1/
Section 202 (a) (1) of the Clean Air Act requires the EPA to promulgate regulations that provide "standards applicable to the emission of any air pollutant from. any class of new motor vehicles. which in the [EPA Administrator's] judgment cause[s], or contribute[s] to, air pollution. reasonably. anticipated to endanger public heath or welfare." The Clean Air Act defines "air pollutant" to include "any air pollution agent., including any physical, chemical. substance. emitted into. the ambient air."
In rejecting the petition, the EPA concluded that: (1) it had no authority to regulate greenhouse gas emissions as a means of addressing climate change concerns; and (2) even it had such authority, the EPA would exercise its discretion not to regulate this matter as a result of the "conflicting scientific data" on climate change and because more stringent regulations could have an negative impact on the administration's other policies and programs.
A dozen states, local governments and numerous environmental associations challenged the EPA's determination in the U.S Court of Appeals for the District of Columbia Circuit. In a 2-1 decision with three separate opinions, the court held that EPA properly exercised its discretion in denying the rulemaking petition. One opinion also found that the petitioners failed to demonstrate standing in the case because a "particularized injury" could not be demonstrated where "global warming is harmful to humanity at large." 2/
On June 26, 2006, the U.S. Supreme Court granted review. In addition to EPA, respondents opposing review included the Alliance of Automobile Manufacturers, CO2 Litigation Group, Engine Manufacturers Association, National Automobile Dealers Association, Truck Manufacturers Association, Utility Air Regulatory Group and 10 states. 3/
Supreme Court's Holdings
In its April 2, 2007, ruling, the Supreme Court first addressed the issue of standing. EPA argued that the harm of greenhouse gases is too widespread and not a specific enough controversy for Massachusetts and the other petitioners to fall within the jurisdiction of the federal courts under Article III of the U.S. Constitution. The court majority disagreed because: (1) Massachusetts held a special position and interest on behalf of its residents; (2) the harm associated with climate change is serious and based on a strong consensus; (3) EPA's refusal to regulate carbon emissions from new cars at a minimum contributes to injuries to Massachusetts' coastal lands; and (4) the delayed effectiveness of regulating only new motor vehicles and the concern that developing countries are poised to substantially increase greenhouse gas emissions did not excuse EPA from taking steps to slow or reduce global warming.
The court found that the EPA's "steadfast refusal to regulate greenhouse gas emissions presents a risk of harm to Massachusetts that is both 'actual' and 'imminent.' " The court also held that there was a "substantial likelihood that the judicial relief requested" - regulation of greenhouse emissions - would "reduce that risk" in a non-trivial way. Thus, the court concluded that Massachusetts, but not necessarily the other petitioners, had standing to sue.
The court then reviewed the merits of EPA's decision that it lacked authority to regulate new vehicle emissions because carbon dioxide is not an "air pollutant" under the Clean Air Act and that, even if it possessed authority, it would decline to exercise it because regulation would conflict with other administration priorities. Notably, the court could reverse the EPA's determinations only if they were found to be arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.
Despite the narrowness of that review, the court found that greenhouse gases fit well within the Clean Air Act's broad definition of "air pollutant" and that EPA's contrary conclusion could not be reconciled with the statute. In fact, the court found that the Clean Air Act's "sweeping definition" of the term "air pollutant" embraced "all airborne compounds of whatever stripe," including compounds contributing to climate change.
The court also sharply limited the EPA's discretion to withhold regulation of greenhouse gas emissions under §202 (a) (1). The court held that the law requires EPA to regulate an air pollutant if it causes or contributes to air pollution that may reasonably be anticipated to endanger public health or welfare. The five-justice majority concluded that "EPA can avoid taking further action only if it determines that greenhouse gases do not contribute to climate change or if it provides some reasonable explanation as to why it cannot or will not exercise its discretion to determine whether they do."
The court ruled that "EPA offered no reasoned explanation for its refusal to decide whether greenhouse gases cause or contribute to climate change." While stopping short of expressly requiring regulation, the court remanded the matter to the EPA with instructions to "ground its reasons for action or inaction in the statute."
In a dissenting opinion, Chief Justice Roberts (joined by Justices Scalia, Thomas and Alito) opposed what he called the majority's "special solicitude" to the State of Massachusetts, cautioning that the climate change grievances were a more appropriate subject of redress by the Congress and President, not the federal courts. In a separate dissent on the merits, Justice Scalia (joined by Chief Justice Roberts and Justices Thomas and Alito) argued that EPA's judgment on the petition to regulate carbon emissions was based on permissible reasons that warranted deference from the court.
Implications of the Opinion
While little immediate impact is expected, this decision potentially will have significant political and regulatory consequences. President Bush on May 14, 2007, issued an executive order directing the EPA and other federal agencies to promulgate new regulations to reduce motor vehicle emissions by the end of 2008. Although the administration has released little detail concerning the make-up of future regulations, White House press secretary Tony Snow indicated that the President's position was unchanged and that he prefers a market-based, voluntary approach to addressing global warming issues. The White House also suggested that federal agencies should use the President's proposed goal of reducing national gasoline consumption by 20 percent within 10 years through increased use of alternative fuels and enhanced fuel efficiency standards as a starting point for the new regulations.
Leading environmental groups already have criticized the administration for embracing a position that does not call for mandatory caps on greenhouse gases. Despite the heavy political discourse which dominates this issue, EPA now may be left with no choice but to make an "endangerment" finding justifying the regulation of greenhouse emissions. Otherwise, between the official position of the Executive Branch and the scientific consensus on the issue, EPA would be exposed to further court challenge and a ruling that its continuing refusal to act on greenhouse gases was "arbitrary and capricious."
Given the administration's concessions regarding the dangers of greenhouse gases generally, the long-term impact of this decision will not be limited to the automobile industry. Well-funded environmental groups such as the Natural Resources Defense Counsel already have indicated that they intend to pursue regulations to reduce greenhouse gas emissions from such greenhouse gas emitters as power plants, refineries, semiconductor and other electronic equipment manufacturers, chemical manufacturers, forest products manufacturers, the steel industry and other fixed sources of greenhouse gases. In addition, auto manufacturers' and others' lawsuits against California, Vermont and Rhode Island regarding those states' greenhouse gas regulation efforts will be severely hampered, if not mooted.
Moreover, the Supreme Court's opinion will alter the political, legislative and cultural discourse on this environmental issue. Indeed, environmental activists, both domestically and abroad, are likely to be galvanized in their push for climate change legislation as a means of avoiding an incremental regulatory approach by future administrations. It remains to be seen whether Democratic congressional leaders will choose to await future EPA regulation in order to avoid the political risk of enacting costly legislation regulating the nation's leading greenhouse gas-emitting industries. In any event, it is all but inevitable that key industries will be facing greenhouse gas regulations, if not lawsuits on the subject, in the near future.
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For more information about the issues covered in this report, please contact Geoffrey H. Yost in our San Francisco office at (415) 369-7552 or at gyost@thelen.com or Samuel J. Maselli in our Silicon Valley office at (408) 282-1874 or at smaselli@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
ENDNOTES
1/ Alliance for Sustainable Communities; Applied Power Technologies, Inc.; Bio Fuels America; California Solar Energy Industries Assn.; Clements Environmental Corp.; Environmental Advocates; Environmental and Energy Study Institute; Friends of the Earth; Full Circle Energy Project, Inc.; Green Party of Rhode Island; Greenpeace USA; International Center for Technology Assessment; Network for Environmental and Economic Responsibility of the United Church of Christ; New Jersey Environmental Watch; New Mexico Solar Energy Association; Oregon Environmental Council; Public Citizen; Solar Energy Industries Association; and The SUNDAY Campaign.
2/ States: California, Connecticut, Illinois, Maine, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington. Local governments: District of Columbia, American Samoa, New York City and Baltimore.
3/ Michigan, Alaska, Idaho, Kansas, Nebraska, North Dakota, Ohio, South Dakota, Texas and Utah.
©2007 Thelen LLP
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