D.C. Circuit Upholds EPA’s Use of the Clean Air Act to Address Climate Change

Summary: Momentous decision sets a favorable precedent for actions to regulate greenhouse gases.

“Our climate is changing,” the Republican mayor of New York City, Michael Bloomberg, said in the aftermath of the devastation of Hurricane Sandy. There is a division of scientific opinion whether climate change is directly linked to individual severe weather events. But according to Bloomberg, the risk that it is contributing to these events should compel policymakers to take action to address climate change.

The Environmental Protection Agency (EPA) has already undertaken significant action to address climate change based on the scientific consensus that greenhouse gases are causing significant changes to our climate. On June 26, 2012, in Coalition for Responsible Regulation v. E.P.A., the U.S. Court of Appeals for the District of Columbia upheld a series of EPA greenhouse gas rules for mobile sources (cars and trucks) and stationary sources (commercial and industrial facilities) against all legal challenges. The decision is momentous in validating the EPA’s use of the Clean Air Act to address climate change.

The U.S. Supreme Court’s decision in Massachusetts v. EPA in 2007 set the stage. A coalition of parties brought litigation to compel the EPA to use the Clean Air Act to address greenhouse gas emissions from mobile sources. The Supreme Court held that the EPA had the authority to regulate greenhouse gases and that it was required to make a determination whether or not greenhouse gas emissions from human activities were causing or contributing to an endangerment of human health or welfare. But it did not order the EPA to make a finding one way or the other.

In response, the EPA undertook two actions for mobile sources. In the Endangerment Finding in December 2009, the agency determined that greenhouse gases from human activities may reasonably be anticipated to endanger public health or welfare. This triggered the authority to regulate them. Then, in a joint action with the National Highway Traffic Safety Administration (NHTSA) in May 2010, the EPA issued the Tailpipe Rule, setting greenhouse emissions standards for cars and light trucks. These standards were effective on January 2, 2011. The standards are expected to translate into a fuel efficiency standard of 35.5 miles per gallon (mpg) in 2016.

But the EPA did something of even greater significance. Through two other actions, it made stationary sources subject to permitting for greenhouse gas emissions. In a policy interpretation in April 2010 known as the Timing Rule, the EPA concluded that stationary sources would be subject to such permitting under the Prevention of Significant Deterioration program (PSD) when the Tailpipe Rule became effective for cars. Designed to prevent good air quality from getting bad, this program requires stationary sources emitting more than 100 or 250 tons per year of an air pollutant (depending on the industry) to obtain permits for constructions or modifications that increase emissions. The EPA has long applied this program to most regulated air pollutants. Because EPA now regulates greenhouse gases from cars, it also regulates greenhouse gases from industrial facilities.

The problem is that carbon dioxide is generated in much greater volumes and by more activities than traditional pollutants. Many commercial and industrial facilities that were not previously subject to permits would now require them. To avoid imposing costly burdens, the EPA issued the Tailoring Rule in June 2010. Different stationary sources would now require permits at different times, based on their levels of emissions. These levels (e.g., 75,000 and 100,000 tons per year) are much greater than the usual 100/250 tons per year threshold.

In Coalition for Responsible Regulation, Inc. v. EPA, some states and industrial groups claimed the EPA overstepped its authority and that its rules would unfairly burden them. But the D.C. Circuit upheld the Endangerment Finding on the merits. The scientific evidence was sufficient to support a finding that greenhouse gases contribute to climate change and present a danger to human health and welfare.

The court upheld the Tailpipe Rule against a claim that the EPA lacked authority to issue it. Authority rests not only with the NHTSA but also with the EPA.

Finally, the court upheld the Timing and Tailoring Rules. The court rejected the argument that the EPA violated the law by setting new permitting thresholds and multiple dates for compliance. The parties did not even have standing to assert the argument. Without these rules, the number of PSD permit applications would increase dramatically from about 280 to 81,000 per year. Because the EPA merely sought to postpone deadlines for compliance, the parties had not been injured.

The decision clears the way for the EPA to make full use of its Clean Air Act authority to regulate greenhouse gas emissions. Given the current impasse in Congress over climate legislation, the Clean Air Act has become the tool of choice for addressing greenhouse gas emissions at a national level. This is important because the EPA has recently pursued a number of other greenhouse gas initiatives under the Clean Air Act.

In April 2012, EPA proposed New Source Performance Standards requiring new power plants to limit emissions to less than 1,000 pounds of carbon dioxide per megawatt hour, under Section 111 of the Clean Air Act. To put this in perspective, the average natural gas plant emits 800 to 850 pounds of carbon dioxide per megawatt hour, and the average coal-fired plant emits an average of 1,768 pounds of carbon dioxide per megawatt hour. Therefore, the EPA’s emissions requirements will have a significant effect on the competitiveness of the coal-fired plant industry.

Requiring new power plants to take steps to limit their greenhouse gas pollution will force them to “internalize” or account for emissions that they would otherwise emit into the atmosphere. These additional costs may also increase the economic incentive for utilities to invest in renewable energy generated by the sun, wind, and other clean sources. As the renewable sources scale up, costs will come down. The standard also provides certainty for utilities planning to build new power plants.

On October 15, 2012, the EPA and NHTSA adopted a new fuel efficiency standard of 54.5 mpg for cars and light-duty trucks, for model year 2025. Combined with the Tailpipe Rule, these standards will cut greenhouse gas emissions from these sources in half by 2025, reducing emissions by 6 billion metric tons over the life of the program. This is more than the total amount of carbon dioxide emitted by the United States in 2010. According to the EPA, the national program to improve fuel economy and reduce greenhouse gas emissions will save consumers more than $1.7 trillion at the gas pump and reduce U.S. oil consumption by 12 billion barrels. Remarkably, the standards are supported by 13 major automakers, which together account for more than 90 percent of all vehicles sold in the United States.

Meanwhile, the EPA is under a court order to develop New Source Performance Standards for oil refineries, under Section 111 of the Clean Air Act. According to the agency, refineries are the second-largest source of greenhouse gas emissions in the United States, and there are cost-effective strategies for reducing their emissions. Under a settlement, the agency agreed to propose standards for new refinery facilities and emissions guidelines for existing facilities by December 10, 2011, and issue final standards by November 10, 2012. However, earlier this year the EPA announced that it would not be able to meet this schedule. No new deadline has been set.

EPA has also announced its intention to propose New Source Performance Standards for new/modified and existing major stationary sources of greenhouse gas emissions, as well as for Portland cement plants, which are the third highest stationary U.S. source of carbon dioxide emissions.

Several bills have been introduced in Congress to repeal the EPA’s authority to regulate greenhouse gas emissions under the Clean Air Act. So far, they have not gained any traction in the Senate. With President Obama’s re-election and control of the Senate remaining in the hands of a Democratic majority, the EPA’s rules would seem to be safe. The larger question is whether climate change will emerge as a priority issue for Obama’s second term, and whether the EPA will make full use of its considerable authority under the Clean Air Act to bend the curve of greenhouse gas emissions.