In a significant setback to the Obama administration’s climate agenda, five Supreme Court justices prevented the Clean Power Plan from taking effect until after a challenge from 25 states, four state agencies, and dozens of industry groups until the review in the courts has been completed. Chief Justice John G. Roberts and Justices Samuel A. Alito, Jr., Anthony M. Kennedy, Antonin Scalia, and Clarence Thomas voted to stay the implementation of the rule, while 4 others would have denied the challengers’ application for a stay.
The Clean Power Plan would require drastic cuts in states’ carbon dioxide emissions, trying to reach a nationwide goal of a 32 percent reduction in power plant emissions below 2005 levels by 2030. States and industry groups challenging the regulation assert that the Environmental Protection Agency is not simply attempting to reduce emissions from a point source (the power plants), but restructure how the country generates electricity. When offering options for compliance, the EPA proposed that states could increase renewable electricity generation, implement more energy efficiency standards, tax carbon or set up a regional cap-and-trade with neighboring states.
States were on the hook to submit plans for how they would comply with the Clean Power Plan by September, with the possibility of a two-year extension. They can now hold off until the case works its way through the DC Circuit where a hearing is set for June 2. After the DC Circuit rules, the case will likely be heard by the Supreme Court.
As Politico reports, “[l]awsuits over the rule are expected to continue into 2017 at the earliest, with the Supreme Court widely expected to be the final arbiter of the regulation.” One lawyer defending the EPA’s Clean Power Plan remarked, “What would I tell them if I were still their lawyer? Start thinking about alternatives." Nevertheless, no matter what the Supreme Court ultimately decides, a new president will be in office. A new administration could toss the rule out, subject to the requirements of the federal rulemaking process, before any implementation begins.
As a result of the stay, states do not have to worry about sunk costs, which are costs that would have to be incurred but can’t be recovered. Further, states won’t have to take actions that could fundamentally alter their economy and energy sector, which would be difficult to undo. The recent experience with the EPA’s Mercury Air & Toxics Rule (MATS) is instructive. Last year, the Supreme Court struck down the EPA’s MATS to regulate mercury emissions from coal and oil-fired power plants. In that opinion, the Supreme Court handed a victory to Americans concerned with unelected bureaucrats driving up energy costs by overturning a costly environmental regulation that lacks any meaningful direct environmental benefit.
However, in many respects, the Court’s decision was symbolic because states had already gone down the irreversible costly path that closed power plants, destroyed jobs, and curbed economic growth. The Court’s stay of the Clean Power Plan prevents a repeat of a similar result.
Unless courts are willing to issue stays when addressing rules, agencies will feel they have the greenlight to develop far-reaching rules (even more than usual) that may be legally questionable. After all, even if agencies lose, they might actually win because regulated entities will have to take the necessary steps to be in compliance while any legal challenge is pending. Once all the investments are made, regulated parties are not likely to undo the costly steps they took to meet regulatory requirements. The Supreme Court’s issuance of a stay in this current case ensures that states, the energy sector (including consumers), and the economy aren’t harmed while the litigation proceeds.