The Environmental Protection Agency still has pathways for reducing greenhouse gas emissions from the power sector following the Supreme Court’s ruling on Thursday that took away one possible avenue, according to legal experts.

The court ruled that the EPA cannot set up a program that uses “generation shifting” among a broad fleet of power plants, such as the Obama administration’s Clean Power Plan. Under the program, states would have had to meet state-wide emissions reduction targets, potentially by replacing coal-fired power plants with lower- or non-emitting generating resources.

“The decision bars the expansive approach to carbon regulation adopted by the Clean Power Plan, which required ‘beyond the fence line’ actions for compliance,” Peter Tomasi, of counsel and a business lawyer with Foley & Lardner, said in an email. “As a practical matter, this opinion does not appear likely to substantially alter the current transition from fossil to renewable generation.”

It is a narrow opinion focused on generation shifting that doesn't get into “inside or outside the fence line distinctions,” Carrie Jenks, executive director of the Harvard Law School’s Environmental & Energy Law Program, said.

The decision comes while the EPA is developing new greenhouse gas emissions standards for existing fossil-fueled power plants, with a proposal expected in March.

Pointing to language in the Clean Air Act, Tomasi noted the court said “[w]e have no occasion to decide whether the statutory phrase ‘system of emission reduction’ refers exclusively to measures that improve the pollution performance of individual sources.”  

This appears to allow the EPA to craft a newer rule more narrowly targeted to individual facilities requiring something more than emission controls, Tomasi said.

EPA retains options on power plant emissions

The EPA retains a broad range of options for reducing carbon emissions from individual power plants, according to Matthew Price, a Jenner & Block partner.

“EPA could still adopt technological standards and impose those on fossil fuel plants. The owners of those plants could comply in whatever way they want, whether that's through generation shifting or otherwise, but the standard would be set based on something that the plant could do to reduce its emissions,” Price said.

The court decision isn’t a “major blow” to the EPA, according to Price, who noted the Clean Power Plan never took effect.

“This just means the EPA needs to approach its goals in a more conventional way, and it still has quite a broad range of options to do that,” Price said.

Following the ruling, the EPA still has the authority and tools to regulate carbon emissions from power plants, according to Dena Adler, research scholar at the New York University School of Law’s Institute for Policy Integrity.

“While this is a setback for addressing the climate crisis, EPA still retains the authority, and an obligation, to limit greenhouse gas emissions, including from the power sector,” Adler said in an email.

Besides increasing the efficiency of power plants through heat rate improvements, the EPA can look to other ways to lower carbon emissions such as co-firing with low-carbon fuels and carbon capture and sequestration, according to Adler.

Also, the EPA can tighten other regulations, such as ones governing ozone, particulate matter and coal ash, that may have the effect of lowering carbon emissions by driving more coal-fired power plants to retire, according to Akshaya Jha, assistant professor of economics and public policy at Carnegie Mellon University.

“And if natural gas prices get lower again, at some point we might see the retirement of coal-fired power plants, even absent this form of regulation,” Jha said.

The ruling provides impetus for market-based solutions, such as a price on carbon, according to Neil Chatterjee, Hogan Lovells senior advisor and former Federal Energy Regulatory Commission chairman.

“This was a pretty strong signal from the court that the regulatory state is not the place in which we should be making policies regarding carbon mitigation,” Chatterjee said.

Potential emissions reduction pathways

Greenhouse gas emissions from the power sector, the second leading source of U.S. carbon emissions behind transportation, have dropped by about 21% since 1990, driven by a shift to lower- and non-emitting power resources and energy efficiency, according to the EPA.

There are various pathways to cutting U.S. carbon emissions in half by 2030 and reaching net zero emissions by 2050, according to John Bistline, Electric Power Research Institute program manager in the energy systems and climate analysis group.

“There's a lot of ways you can reach those targets, but all of them require action over the next decade,” he said. “It's definitely a sort of all-hands-on-deck situation, where the more levers or tools you have at your disposal, the more likely you are to reach the targets.”

The pathways include different combinations of federal and state policies, such as carbon cap-and-trade programs, performance-based standards for power plants and tax credits, according to Bistline.

In an article published in May in Science, Bistline and his co-authors said the pace of adding wind and solar resources, retiring coal-fired generation and adding carbon capture to gas-fired power plants must accelerate to meet the 2030 target.

Major questions doctrine may limit regulatory options

However, in a move that could limit regulatory options, in the decision, the court’s majority enshrined a robust “major questions doctrine” into the law, finding that Congress didn’t give the EPA clear authority to adopt the generation-shifting approach used in the Clean Power Plan, according to Kirti Datla, Earthjustice director of strategic legal advocacy.

“If the court thinks that an agency is trying to tackle too big of a problem in too new of a way, it's going to start with the assumption that the agency can't do that and require the agency to overcome that with the kind of level of clarity that just doesn't exist in statutes, especially environmental statutes,” Datla said.

The court’s use of the major questions doctrine is part of a trend, Price said, pointing to a Supreme Court decision in January overturning a U.S. Occupational Safety and Health Administration Covid-19 regulation. 

“It ultimately stems from skepticism about the administrative state and a desire to shift power away from the executive branch,” Price said.

It is unclear what exactly the doctrine means, according to Jenks.

“There's not a lot of clarity except significant political impacts and vast economic consequences,” Jenks said.

The case could be “a canary in the regulatory coal mine” for how courts will interpret agencies’ authority to use their expertise in crafting regulations, Adler said.

“The major questions doctrine is in part problematic because Congress has legislated for decades with an expectation that it can broadly authorize agencies to use their expertise,” Adler said.

Applying the little-used doctrine more broadly will create uncertainty for agencies and the entities they regulate, according to Adler. 

“First-in-kind regulations may be targeted under the major questions doctrine, especially rules that could be characterized as intruding into an area that is the particular domain of state law,” Tomasi said.

“This could be the beginning of a paring back of regulatory powers via the administrative state and maybe restoring more of these key decisions to Congress and away from some of these executive branch agencies,” Chatterjee said.

State role in carbon reductions

State policy has been “a workhorse” in reducing carbon emissions and that’s likely to continue, Bistline said. “You can try different approaches, see what works and learn from those best practices.”

After the court decision, the 24 governors in the U.S. Climate Alliance pledged to redouble their efforts to reduce carbon emissions in their states.

“This ruling makes clear that the actions of governors and state legislatures are more important than ever before,” Alliance co-chairs Govs. Kathy Hochul, D-N.Y., Jay Inslee, D-Wash., and Gavin Newsom, D-Calif., said in a statement. “We reaffirm our commitment to decarbonizing the power sector using our authority at the state level.”

States in the alliance have pledged to collectively cut greenhouse gas emissions by at least 50-52% below 2005 levels by 2030, and collectively achieve overall net-zero carbon emissions by 2050.

“Local and state governments have a wealth of complementary authorities to reduce greenhouse gas emissions and help tackle climate change, including through their decisions around transportation, zoning, and building codes,” Adler said.