SCOTUS curbs US climate efforts

ESG+ Matters

SCOTUS curbs US climate efforts

Eileen Gavin - 11 July 2022

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The US Supreme Court (SCOTUS) continues to court major controversy, the latest with its 30 June ruling (by 6-3) that the federal Environmental Protection Agency (EPA) lacks the broad authority to regulate power plant emissions. The case, West Virginia v. EPA, stemmed from former President Barack Obama’s Clean Power Plan, which, if implemented, would have enforced specific emissions mandates on coal-fired power plants.

But the ruling, which said that ‘major questions’ (such as greenhouse gas emissions caps) must be decided by Congress, has the potential to have much broader reach, affecting a range of policy areas.

This is not least because of an expected strong mid-term result in November for the Republican Party, which is likely to secure at least the House, putting both the legislature and the supreme court under conservative control.

Liz Hypes, our Senior Environment and Climate Change Analyst, examines the implications of the latest SCOTUS decision; chief among which she highlights:

  • The ruling is a big setback for the US climate agenda, which includes halving GHG emissions by 2030, and suggests that the specific target for power plants to reach net-zero emissions by 2035 has gone up in smoke
  • The case will raise concerns over the potentially shaky legal grounds of other climate efforts, such as the SEC’s proposed climate disclosure rules, Hypes notes. The SEC is seeking to push publicly listed US companies to the forefront of global climate risk reporting requirements. But as we already warned back in March, there is a reasonable chance that its proposals may not come to pass: with business groups including the US Chamber of Commerce pledging to battle the SEC in court
  • Furthermore, the SCOTUS ruling creates precedent for scrutiny of the regulatory authority of other federal and executive agencies. Hypes warns that the EPA ruling has already triggered concerns over pollutants and public health, but these will become much more pronounced when seen in light of other agencies possibly impacted. These could include, for example, the Centers for Disease Control and Prevention (CDC), the Occupational Safety and Health Administration (OSHA), and even the Department of Labor (DOL)
  • With US federal government policy and regulatory agencies increasingly under conservative control on Capitol Hill (whether congress or the supreme court), the onus, says Hypes, will be on US state and city authorities – as well as corporates – to do much of the heavy-lifting on climate
  • This will further complicate an already-complex regulatory and legal environment for investors and companies, particularly as some ’Red states’ have begun promoting bills punishing perceived climate-conscious companies. The Republican state governor of Texas, Greg Abbot, for instance, signed into law a new ‘anti-ESG bill’ in early June, prohibiting state financial institutions (including its six pension funds) from investing in businesses that boycott fossil fuels
  • Whatever the fallout from the ruling, Hypes expects climate lawsuits to follow. On 29 June, the day before the SCOTUS ruling, two separate court cases were filed against the US government over the federal oil & gas lease sale in Wyoming. The Biden administration may find itself the subject of many more such suits should NGOs or public groups feel that it is backsliding or ‘immobile’ on climate action following the SCOTUS ruling.  Attorney Generals in Republican-dominated states are also likely to challenge the federal government, including at the Supreme Court
  • Against this backdrop, fossil fuel companies should also expect an uptick in lawsuits on the corporate side, with activists increasingly resorting to litigation in the face of weaker federal regulatory requirements
  • Despite the ruling truncating the powers of the EPA, Hypes notes that it still has remit to regulate GHG emissions, albeit on a much smaller and narrower scale. As such, it is highly likely that it will proceed with plans to set a new standard dictating GHG emission rules for specific power plants. For example, the EPA could introduce rules on the types of technology that can be utilized at plants.  With fossil fuel-fired power plants the second highest emitter in the US, curbing power plant emissions will have to remain a central tenet of any transition plans
  • The ruling is unlikely to sway the direction of travel in the US power sector - where it is clear that coal is in a losing battle. Most major US utilities are proactively transitioning from coal to clean energy, regardless of regulations. The US will not build any new coal-fired power plants, and the Energy Information Administration (EIA) estimates that US coal output fell 35% between 2015 and 2021, and will continue to fall

Ultimately, though the SCOTUS ruling may not have fully curtailed the EPA and the Biden administration’s climate efforts, it will slow them down.

And in the climate fight, time is of the essence.

Eileen Gavin

Principal Analyst, Global Markets & Americas
 

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Quote of the week

Branding fossil gas as transitional and green in the Taxonomy is unlawful as it clashes with the EU’s key climate legislation, including the European Climate Law and the Taxonomy regulation itself. ClientEarth, alongside other organisations, will now be looking at options to challenge the inclusion of fossil gas in the Taxonomy in court – greenwashing cannot win.

Marta Toporek

ClientEarth lawyer Marta Toporek, 6 July 2022
 

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