The US Court of Appeals for the District of Columbia Circuit struck down the outgoing Trump administration’s Affordable Clean Energy (ACE) rule last week, on the final day of Trump’s term in office. The decision hinged on the question of whether regulations to limit greenhouse gas emissions could apply only to the actions taken by individual power plants—the position held by the US Environmental Protection Agency (EPA) under Trump, based on the agency’s narrow interpretation of its own authority under the Clean Air Act (CAA)—and not to efforts that affect the electricity sector as a whole, such as swapping out coal generators for cleaner alternatives. The court decided that EPA’s restrictive legal assumptions were not permissible grounds for promulgating the ACE rule.
This decision by the DC Circuit court may open up options for the Biden administration to instate its own rulemaking under the CAA, but the Biden administration’s climate policy team should not get its hopes up just yet.
On the upside, the decision opens a pathway for reducing environmental pollution by placing regulations on co-firing—the simultaneous combustion of two or more types of material—at power plants across the country. All kinds of similar flexibility for regulating greenhouse gases will now be possible through Section 111(d) of the CAA, relating not just to co-firing, but also fuel switching, dispatch order changes, and even renewable energy resources.
On the other hand, the decision does not license bold CAA climate policy from the Biden administration, nor even necessarily modest emission reduction targets like the Obama-era Clean Power Plan. Agreement among two of the three judges on the DC Circuit is a good show of support, but this circuit court decision doesn’t predict how the US Supreme Court might rule—nor does it even predict what the whole (en banc) DC Circuit might decide. Last week’s DC Circuit court decision won’t get appealed to a higher court, largely because EPA no longer answers to the Trump administration—but any and all of Biden’s climate efforts moving forward most likely will be appealed to a higher court. And even if the DC Circuit would uphold a revamped “Clean Power Plan 2.0,” the Supreme Court is likely to be much more skeptical.
The ruling also does not offer a clear repudiation of other important elements of the Trump administration’s environmental agenda. For instance, the court did not address differences between how the Obama EPA and Trump EPA calculated the social cost of carbon, relating to whether to count benefits outside US borders and how to compare future benefits of climate mitigation against present costs, the quantification of which is known as the discount rate. The difference in the calculations, going from the Obama number of $43 to the Trump number of $1, was the basis for the Trump EPA’s finding that the costs of the Obama-era Clean Power Plan outweighed the benefits.
The DC Circuit majority ruling justified its decision to toss the ACE rule based solely on statutory interpretation grounds, namely, that EPA wrongly claimed that Congress specifically limited the agency’s ability to impose regulations under the CAA. If the Trump EPA had claimed, instead, that the CAA was sufficiently vague such that the agency could interpret its own authority as limited, then the ACE rule might have been upheld. For whatever reason—whether because they already had the statutory interpretation grounds to revoke the ACE rule, or because they felt no need to invoke the issue—the DC Circuit judges make no mention of the substantial difference in social cost of carbon calculations between the Obama and Trump administrations.
The Biden administration is poised to revisit this issue. The Biden EPA undoubtedly will propose a new estimate for the social cost of carbon, likely using a lower discount rate and accounting for the global impact of carbon emissions. Both of these considerations will bring the social cost of carbon back up.
The obstacles make us hesitate to say that Biden has a clear path ahead; but we think it’s appropriate, given previous formal findings about the harm of greenhouse gases to human health and welfare, and EPA's responsibility to mitigate such harm, for the Biden administration to leverage the CAA to push ambitious climate policy. The DC Circuit vacating the ACE rule is a good thing for effective climate policy, but it may be a trap for the Biden EPA—unless the administration manages to design regulations that can pass through a skeptical Supreme Court.
