In another high-profile Supreme Court ruling with West Virginia v. EPA, America’s highest court narrowed the scope of the Environmental Protection Agency (EPA)’s authority to regulate greenhouse gas emissions that drive climate change. Many proponents of climate action view the decision as significantly kneecapping the federal government’s ability to address climate change. The reality, however, is that successful climate outcomes will not come from reliance on the regulatory state. Instead, the ruling should light a fire under policymakers to work together on comprehensive legislation that opens access to America’s resource abundance, lowers costs for families and businesses and drives emissions reductions across all sectors of the economy.
How We Got Here
In 2007 the Supreme Court ruled that carbon dioxide and other greenhouse gas emissions (GHGs) are pollutants and can be regulated under the Clean Air Act. The Court made no determination as to whether the EPA should regulate GHGs, but that the agency could. Two years later, the Obama administration’s EPA published an endangerment finding that GHGs “threaten the public welfare of current and future generations.” The agency began with regulations on tailpipe emissions and new power plants, but the central tenet of the Obama administration’s regulatory agenda was the Clean Power Plan (CPP).
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The CPP targeted carbon dioxide emissions from existing power plants, but permitted states to expand renewable power generation, implement energy efficiency mandates, and use regional cap-and-trade programs as potential ways to achieve compliance. More than two dozen states sued, arguing that the CPP exceeded the statutory authority of the EPA because the rule was not actually targeting the point source of emissions (the power plant) but instead authorizing states to effectively remake their electricity portfolios. In a rare move, the Supreme Court stayed the implementation of the CPP in February 2016. Legal analyst Jonathan Adler noted that the EPA undermined its own arguments against the stay, writing, “In promoting the plan, the EPA repeatedly emphasized that the CPP represented the most ambitious climate-related undertaking in the agency’s history and crowed that the plan would lead to the complete restructuring of the energy sector.”
Fast forward a year. President Trump is in office and the Trump EPA begins the process of repealing the CPP and replacing it with a much more modest regulation, the Affordable Clean Energy (ACE) rule. The EPA finalized the repeal and replacement in September 2019. However, environmental groups and states sued the EPA again, arguing the ACE regulation was too lax. On President Trump’s last day in office, “the U.S. Court of Appeals for the District of Columbia Circuit vacated the repeal of the Clean Power Plan, vacated the ACE Rule, and sent the issue back to the EPA for additional proceedings.”
Several states and coal companies challenged the D.C. Circuit’s ruling and the Supreme Court agreed to take the case (for more of the case, see here). The Supreme Court’s decision in favor of West Virginia does not prohibit the EPA from regulating greenhouse gas emissions but how the agency goes about it.
The Economic and Environmental Failure of Regulatory Ping Pong
If you stuck with me through all of that, it’s clear to see the regulatory approach to addressing climate change has its flaws. Representative John Dingell (D-Mich), who played an integral role in enacting major environmental statutes like the Clean Air Act, correctly predicted that the EPA’s regulation of greenhouse gas emissions would be “a glorious mess.” He presciently warned that “We will have a fine array of lawsuits to bless us all with a huge amount of litigation.”
Neither party should be content with the status quo. Relying largely on the administrative state to set policy has been good for lawyers and lobbyists but not so great for regulatory certainty. Think about many of the major energy and environmental issues we face today. The Keystone XL Pipeline, energy production on federal lands, climate regulations on power plants, fuel economy standards, and endangered species act protections – just to name a few. Decisions are left to the person sitting in the White House. Lawsuits ensue. Maybe a decision is made or maybe the lawsuit extends to the next administration. Then it’s wash, rinse, and repeat.
The regulatory back-and-forth followed by seemingly endless lawsuits makes it extremely difficult to plan, invest, and build. That holds true for natural resource extraction, renewable energy development, and energy infrastructure siting and permitting. While the pandemic undoubtedly played a significant role in knocking energy supply and demand out of whack, policy and regulatory uncertainty have exacerbated the imbalance.
Time for Elected Officials to Step Up
Whether you think the West Virginia v. EPA decision is good, bad, or ugly, the frustrations felt across the political spectrum underscore the need for Congress to step up and get to work. High energy prices are crushing American households and companies. A global pandemic has adversely affected supply chains, and energy security in Europe is hanging on by a thread because of Russia’s invasion of Ukraine. Several European nations are returning to coal-fired generation to build up natural gas inventories ahead of winter. The amount of new coal generation China is bringing online this year and India is bringing online by the end of 2023 will wipe out the entire emissions reductions the U.S. has made between 2005-2020, which led the world by far.
A constructive energy and climate agenda must account for all these factors. C3’s recently released Climate and Freedom Agenda does just that. It offers policy solutions to increase supplies, lower energy prices and accelerate clean energy deployment. In ten chapters, the report lays out policy and regulatory reforms that would help diversify energy supplies, remove supply chain constraints, invest in healthy ecosystems, and build more resilient communities. Importantly, the report identifies legislative proposals, many of which have bipartisan support, that Members have introduced to empower the private sector to build cleaner and faster.
Representative Dingell was an advocate for addressing climate change through cap-and-trade legislation. While tradeable permitting can be cost-effective ways to reduce pollution, cap-and-trade schemes to reduce carbon dioxide emissions have had challenges, and U.S. proposals during the Obama administration had their flaws.
In discussing cap-and-trade, Rep. Dingell emphasized, “EPA may not have authority to adopt an economy-wide cap-and-trade program under the existing Clean Air Act. If it does, EPA will have to make decisions, such as who gets how many allowances, that are inherently political decisions that should be made by an elected and accountable Congress.”
Dingell’s comments are still very much relevant today. America’s energy and climate policy should be led by an elected and accountable Congress. Policymakers should lead by opening markets and modernizing regulations so that innovators and the private sector can provide more affordable, dependable power, enhance energy security, and reduce emissions. The United States will demonstrate international leadership by accelerating innovation, opening markets to investment and trade, and making cleaner choices cheaper for developing countries.
Many climate hawks may see the West Virginia v. EPA ruling as a setback for climate progress. Instead, it should be an opportunity for policymakers to step up, double down on innovation, and empower the private sector to deliver the energy and climate solutions Americans and the rest of the world need.