The Supreme Court’s Clean Power Plan Stay: The Good, Bad and the Ugly

By Nigel Purvis and Maria Belenky and Joel Finkelstein
Climate & Energy, Transformative Analysis

With one unexpected action, the United States Supreme Court placed one of the signature achievements of President Obama’s climate agenda into legal jeopardy.

On 9 February 2016, the Court ordered an immediate halt to further implementation of the Clean Power Plan (CPP), the administration’s plan for curtailing carbon emissions from the power sector. This blog delves deeper into both the basis for this decision, as well as the political and practical implications of the stay for U.S. climate commitments.

What the Supreme Court did and didn’t do

When considering the legality of a regulation issued by the Executive Branch, U.S. courts can, and occasionally do, temporarily suspend enforcement of the regulation in question while the case waits its turn to be heard and decided based on merit. Known as a “stay,” this action requires the petitioner (“plaintiff”) to prove three arguments to the court:

  1. That the Court is likely to eventually take up the case
  2. That there exists a “fair prospect” that the plaintiffs would win when the case is heard
  3. That the plaintiffs would be “irreparably harmed” by being forced to comply with the regulations in the short term (before a final decision is made)

Applying this three-part test to the CPP, one quickly sees that the first two criteria can be met relatively easily. Indeed, given the importance and high profile of this case, the Supreme Court has long been expected to eventually take it up (checks #1). Moreover, even the rule’s most ardent legal defenders concede that it relies on a creative interpretation of the underlying law. As such, it’s not hard to envision a scenario where the suing states win (checks #2). It bears repeating, however, that “fair prospect” does not mean that this outcome is likely or probable, only that it is a reasonable possibility.

How the case meets the third and final criteria – showing “irreparable harm” – is less obvious. Defenders of the CPP argue that failure to implement the rule would worsen climate change and cause irreparable harm on the citizens who will have to deal with its impacts. Opponents argue that even though the rule does not require emissions reductions for several years, preparatory actions for possible implementation would cause irreparable harm to electric utilities, coal companies and consumers. The Supreme Court, led by its five conservative justice majority, agreed with the latter.

What happens next

Currently, the CPP sits before the DC circuit court. The three-judge panel selected to hear the case in June 2016 has a liberal majority, which means the regulation could very well be upheld before the Supreme Court considers it. If the DC circuit court rules against the Obama administration, it is likely to do so on narrow and technical grounds. It might, for example, require the EPA to redo a portion of the CPP, which would push back implementation by a year or two.

The Supreme Court, on the other hand, could rule against the CPP in a more fundamental manner. It could decide, for example, that the provision of the Clean Air Act on which the EPA relies does not permit regulation of greenhouse gases. Alternatively, the Court could require the EPA to substantially weaken the CPP.

The unexpected death of Justice Antonin Scalia, one of the Justices most hostile to environmental regulation, has made it almost impossible to predict what the Supreme Court will decide. It is unlikely that the current eight-justice court – one that is evenly divided between Justices who lean liberal and conservative – will hear the case before a ninth Justice is confirmed. Looking ahead, the Supreme Court will likely not hear the case before October 2017 and not decide before May 2018.

Impact of the stay on U.S. emissions

The Clean Power Plan is undoubtedly an essential component of President Obama’s Climate Action Plan and reducing emissions from the power sector is vital to meeting the U.S. emission target. Yet, should U.S. courts declare the Clean Power Plan illegal, we shouldn’t necessarily expect a complete reversal of recent progress. To truly understand the impact of the stay, it is important to place the regulation into the proper perspective.

The CPP stay has a small impact on the 2020 target. By design, the final rule gave states at least until 2017 to submit implementation plans and until 2022 to begin compliance. This timeline results in only modest expected emissions reductions in 2020. In its Regulatory Impact Analysis, the EPA estimates 63 and 74 million metric tons of CO2 emissions reductions in the rate- and mass-based compliance scenarios, respectively.

Renewables tax extenders will achieve some of the mitigation expected under the CPP. In the FY2016 budget compromise, Congress extended two key renewable energy subsidies: the wind production tax credit and the solar investment tax credit. This development was not previously publicized as a stand-alone emissions reduction measure because most of the impact would be subsumed under the CPP — i.e. deployment of renewables would help states meet their CPP targets. Without the overarching framework of the CPP, additional renewable capacity can be directly counted as an instrument to meet the United States’ national climate targets.

There is little consensus on exactly how much of the CPP’s expected impact will be met through the tax extenders, but a recent analysis from the Rhodium Group pegged the renewable capacity additions in a tax extenders-only scenario at 92 GW between now and 2025. By assuming a very simplified world where these 92 GW produce 2 trillion kilowatt-hours of electricity over 10 years (taking into account that not all facilities will be operating for the entire decade), and that this new renewable energy completely displaces gas-powered generation, we can estimate that the tax extenders would help avoid roughly between 540 and 1,050 million metric tons of CO2 emissions between now and 2025. (The range allows for high and low estimates of future capacity factors for both wind and solar.) By comparison, our earlier analysis showed that the CPP would avoid over 2 Gt of CO2 emissions during the same time period.

Several states will continue planning and implementation despite the stay. Since the Clean Power Plan was first announced, court observers have looked closely at questions of its durability to legal challenges. One thing in its favor is the fact that it would have to be implemented by regulatory bureaucracies in each of the 50 states — and bureaucratic action brings momentum of its own.

That is clearly the case here, as the Supreme Court stay has not halted all action on the Clean Power Plan. Of the 47 states that are affected by the rule, 20 are not part of the CPP suit against the EPA. The majority of these states are pursuing plans for compliance despite the stay. Of those that are part of the litigation, three are continuing to craft implementation plans, albeit perhaps at a slower pace, and five more are assessing further action.

Market forces remain favorable to clean energy. In addition to formal continuation of implementation by states, many business leaders in the energy sector have made clear their commitment to continued adoption of the sort of practices encouraged by the Clean Power Plan. Over the past decade, the United States’ electricity mix has become undeniably cleaner. Not only has the shale boom lowered gas prices and helped natural gas displace coal as the dominant source of power, but renewables have also claimed an increasing share in the nation’s electric grid. At the same time, the declining cost of renewables, coupled with tax incentives, has pushed renewable power to comprise more than half of all new capacity additions. All of this took place without federal regulations and will continue regardless of what happens to the CPP.

While the CPP goal to reduce power sector emissions by 32% below 2005 levels by 2030 is ambitious, the regulation itself was never intended to be responsible for the full reduction. Based on the EPA’s 2015 GHG Inventory, 2013 power sector emissions were already down by 20% from 2005 levels. Simultaneously, the U.S. Energy Information Administration was projecting only nominal increases in energy-related CO2 emissions through 2030 without accounting for the Clean Power Plan. Adopting 2013 as a baseline, the additional role of the Clean Power Plan would be to decrease emissions by a somewhat lower 12%.

All of these factors suggest that at least a portion of the emissions reductions expected under the Clean Power Plan will be achieved whether or not the regulation is delayed or overturned entirely. Let’s all keep this in mind as we watch the rule make its winding progress through the courts.

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On March 22, 2016

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