The Supreme Court will rule on whether the EPA can mandate carbon emission reductions. Here’s why the case is so bizarre

“This is likely to result in one of the most significant environmental rulings the court has ever reached,” Robert Percival, director of the Environmental Law Program at the University of Maryland’s law school, said when the Supreme Court agreed to hear the case last November.

As my colleague Chris Morris recently wrote, the Supreme Court’s imminent ruling on West Virginia v. Environmental Protection Agency is as significant as it is peculiar, with the court set to issue a ruling that has more to do with constraining future action than it does with interpreting previous legislation.

The details are convoluted, spanning three administrations, but are worth understanding.

West Virginia and its fellow plaintiffs claim that the U.S. Court of Appeals for the District of Columbia Circuit misinterpreted a clause of the decades-old Clean Air Act when it decided to revoke the Trump administration’s Affordable Clean Energy Act in January 2021.

The Affordable Clean Energy Act (ACE) was created to replace the Obama-era Clean Power Plan (CPP), which West Virginia and other states challenged in court in 2015, arguing that the EPA overstepped its authority by prescribing what volume of carbon emissions states needed to cut from local power generation.

The CPP was designed to encourage state utilities to phase out coal-powered electricity by setting emission reduction targets that couldn’t be met with coal. Naturally, coal country states like West Virginia, which supplies 13% of the nation’s coal, objected.

The Supreme Court revoked the CPP before it had a chance to take effect, and the Trump administration replaced the defunct act with its own weaker bill, ACE. When the appellate court in D.C. revoked ACE last year, it opened the possibility for the Biden administration to revive the CPP. 

West Virginia is essentially asking the Supreme Court to review, again, whether the EPA has the authority to implement the CPP. That’s why the case is peculiar and, as Morris says, will “set a precedent for future actions” rather than look at a rule already in place.

The CPP is not in effect, and the EPA has already said it doesn’t plan to reinstate it. And we have good reason to believe the agency.

The goal of the CPP—to lower power-related emissions 32% over 2005 levels by 2030—was accomplished by 2019. Not because of the CPP, which never got started, but because market forces (and some other government policies) pushed power generators to phase out coal anyway.

Today, coal is a tiny industry in the U.S., employing roughly 40,000 people in 2020, according to the Washington Post—or 0.02% of the national workforce. Even in West Virginia, which is home to a quarter of U.S. coal workers, the industry accounts for only 2% of the state’s labor force. However, coal is still a major source of electricity in West Virginia, generating 88% of state supply.

The state’s reliance on coal might be why its officials are trying to guard against the EPA one day decreeing that local power generators switch to less carbon-intensive fuels. Natural gas—which is supposed to serve as a transition fuel on the road to net-zero carbon emissions—is fast replacing coal as West Virginia’s dominant revenue stream in the energy sector.

“I think it’s not a bad bet to assume that the justices reached out and decided to take the case because they want to make a statement about EPA’s authority,” Cara Horowitz, co-executive director of the Emmett Institute on Climate Change and the Environment at UCLA School of Law told NPR last year. “And given the makeup of this court, one has to assume that that statement about EPA’s authority is going to constrain the agency.”

Eamon Barrett
– eamon.barrett@fortune.com
@eamonbarrett88

CARBON COPY

Going backwards

Bloomberg reports Germany has pushed other members of the G7 to walk back a commitment to stop funding overseas fossil fuel projects by the end of the year, in order to allow for investments in natural gas. Energy has been a crucial topic of debate among leaders at the G7 meeting this week, as Russia’s prolonged war in Ukraine continues to strain gas and oil supplies for Europe. The bloc has reportedly concluded investment in natural gas will be okay so long as the projects don’t detail climate change commitments or produce any “lock-in effects.”  Bloomberg

Fully electric

The Biden administration has a goal of slashing emissions 50% over 2005 levels by the end of the decade. That’s a steep order but, according to new research in Science, it is doable. U.S. emissions have already fallen 20% below 2005 levels, owing in large part to wind, solar, and gas replacing coal power in electricity generation. Continuing the coal phase out, as well as accelerating the shift to electric vehicles, will do most of the work for meeting Biden’s goals. But even that isn’t easy. EV sales need to leap from 4% of new vehicle sales today to 100% by 2030, the authors say. Fast Company

Rationing fuel

A foreign reserve crisis is forcing Sri Lanka to ration oil and gas, since the government has no funds left for imports. The rationing has forced Sri Lanka into a de facto lockdown, with schools closed and employees encouraged to work from home where possible, although the government is permitting fuel sales for public transport, medicine, and food transport. The island nation has only days worth of fuel left and has dispatched officials to Russia to negotiate direct sales. WSJ

Parliament shamed

The U.K. has shown “scant evidence” of progressing on its climate goals, the government’s independent watchdog, the Climate Change Committee, said on Wednesday. In a report, the committee said the U.K. still had major gaps in its climate policy—the government only has “credible plans” for 39% of required emission reductions—and warned that “the likelihood of under-delivery is high.” FT

IN CASE YOU MISSED IT

Stanford’s first new school in 75 years aims to help address green talent gap by Ambreen Ali

The race is on to build the world’s biggest plant that sucks carbon straight from the sky—with tiny Iceland emerging as an unlikely superpower by Bernhard Warner

The top trends in ESG disclosure from Fortune 100 companies by Sheryl Estrada

Exxon Mobil CEO blames Europe’s energy crisis on ‘underinvestment’ in the oil and gas industry by Eamon Barrett

‘The whole market is in danger of collapsing’: Germany warns of a ‘Lehman moment’ if Russia cuts off natural gas to Europe by Tristan Bove

The race is on to make EV batteries truly sustainable by Mike Finelli

CLOSING NUMBER

$518 billion

Heavy industry like steel production is among the hardest sectors of the economy to decarbonize. But one vital step is to shift from using traditional blast furnaces—where iron ore is melted using coking coal—to installing electric arc furnaces, which produce less CO2. But steel plants aren't making the shift. Worldwide, only 38% of steel capacity under construction plans to install electric arc furnaces, even as national governments set standards for emission reductions. According to Global Energy Monitor, a non-government industry tracker, the reliance on new coal-powered blast furnaces could leave steelmakers with $518 billion of stranded assets when deadlines for emission reductions hit and those blast furnaces need to shut down.