On June 30, the Supreme Court ruled in West Virginia v. EPA that the Environmental Protection Agency cannot compel states to regulate their emissions through “generation shifting”—that is, by creating a system-wide cap-and-trade market to transition from coal and natural gas toward renewable sources of energy. Generation shifting was a key building block of the Obama administration’s Clean Power Plan (CPP), but it prompted attorneys general in several fossil-fuel-producing states to sue in 2015. The CPP was never implemented—it was stayed by the Supreme Court and then scrapped by the Trump administration—and the Biden administration does not intend to implement it now, as its modest generation-shifting goals have already been met and exceeded by market forces. Yet the court took the case anyway, presuming that President Biden’s EPA would propose a new set of more-ambitious standards that would justify the plaintiff’s claim of injury.
The basis for generation shifting in the CPP was a catch-all provision in the 1970 Clean Air Act, Section 111, which authorizes the EPA to determine the “best system of emissions reduction,” factoring in reasonable constraints of cost and health, and then to set an emissions standard based on what can be achieved by that system. The EPA under President Obama understood that the clearest, most cost-effective way to reduce emissions was to do so systemically, rather than just mandating upgrades at individual fossil-fuel power plants. No technological upgrades can improve the efficiency of a coal-fired power plant enough to meet the EPA’s goals for curbing climate change. Reaching those goals would require states to reduce the share of energy generated by these plants, or to compensate for their emissions by using carbon capture and storage, installing new windmills and solar panels, or purchasing emission credits in a cap-and-trade program. Such “outside the fence” regulation did not sit well with the Supreme Court’s conservative justices.