It’s a pivotal day for US climate policy

One thing to start:

• The UK could shut off gas pipelines into Europe if it suffers emergency shortages in the coming months, threatening to exacerbate a regional energy crisis

Welcome back to another Energy Source!

We’ll get straight to it today because it’s a potentially historic day for how the US deals with climate change.

Myles breaks down a big Supreme Court ruling expected in just a few hours that could undermine the Biden administration’s (and future presidents’) ability to regulate carbon emissions.

In Data Drill, Amanda has polling showing that pricey petrol may not be driving Americans into purchasing electric vehicles. Potential buyers still worry about big price tags, range and charging.

Thank you as always for reading!

Justin

Why you should care about today’s Scotus ruling

Three hours after this email hits your inbox, the US Supreme Court will announce a decision with seismic implications for American climate policy — and potentially the whole remit of the federal government.

The nation’s top court is set to rule on the authority of the Environmental Protection Agency to limit greenhouse gas emissions under existing legislation. 

That matters because gridlock in Congress means that the only realistic short-term route for the federal government to clamp down on emissions is through regulation. If the EPA is neutered in its ability to set emissions standards, then the prospects for Joe Biden’s plans to green the US economy look very bleak indeed. 

Today’s Energy Source takes a dive into what is at stake in West Virginia vs EPA and tries to parse some of the dense legalese surrounding this complex case. This is your nerd’s guide to the biggest climate change ruling in decades.

Let’s take a step back

The case, brought by a host of Republican state attorneys-general and the coal industry, takes issue with previous interpretations of the Clean Air Act of 1970 and the scope it gives the EPA to set rules clamping down on emissions from power plants. 

Barack Obama’s administration used that piece of legislation as the basis for his Clean Power Plan, which would have forced electricity generators to slash carbon emissions and shift towards cleaner sources. His administration relied on an earlier Supreme Court ruling that carbon could be regulated as a “pollutant” under the 1970 law. 

But the policy was stalled and later binned by the administration of Donald Trump before it could take effect. Trump put forward a replacement policy, the Affordable Clean Energy rule, which was much more lenient in its requirements of generators. That too was never enacted after it hit the buffers in the courts. 

So, in a highly unusual state of affairs, West Virginia vs EPA relates primarily to two policies that have never actually been enacted. 

Yes, but . . . 

The plaintiffs are worried about what is yet to come. The Biden EPA has plans to put forward its own rule on power plant emissions next year.

And as things stand, in the words of West Virginia and co, the EPA has been granted “unbridled power” to decide “whether and how to decarbonise almost any sector of the economy” under what they see as an obscure provision of a half-century-old law, whose current usage was never envisaged.

In other words, they say, the agency is overstepping the authority given to it by Congress. 

What will happen?

Many analysts expect the court to side with the plaintiffs in some shape or form. Three of the four justices who dissented in the landmark 2007 case, Massachusetts vs EPA, which found the Clean Air Act did provide this authority, are still there. And another three conservative justices have joined them on the bench as part of a broad rightward shift on the court. 

The question is how far they go. They could take a limited decision restricting the specific ability of the EPA to regulate CO₂ emissions from power plants. That is unlikely. 

They may go further and clamp down on the agency’s ability to regulate other sources of emissions. That would be bad news for the much-vaunted methane crackdown. 

A more sweeping decision could overturn Massachusetts vs EPA altogether and decide the Clean Air Act does not allow the agency to limit greenhouse gas emissions at all. There would go Biden’s plan to green the grid and set the country on a path to net zero.

There is, then, a wide range of potential outcomes. As analysts at ClearView Energy Partners noted yesterday, no one is certain where the court will land:

“On the eve of the session’s last day, there appears to be more confusion than consensus on where the court is likely to wind up.”

The nuclear option

But the implications could reverberate further.

There has been serious discussion of the possibility that the court might decide to use the case to throw out what is known as the Chevron Doctrine — a decades-old precedent by which it defers to government agencies in the interpretation of ambiguously defined statutes. 

Some legal scholars believe the court could chuck Chevron in favour of an alternative — such as the “major questions doctrine”, which holds that some areas of particular national significance should be reserved solely for Congress to act on (rather than federal agencies).

While the court has leaned on this doctrine before in some decisions, it has never laid out its scope. Should it choose to do so today, the repercussions will be huge.

There would be big implications for climate regulation well beyond the EPA: tailpipe standards administered by the EPA and National Highway Traffic Safety Administration; disclosure rules put forward by the Securities and Exchange Commission; emissions regulations set by the Federal Energy Regulatory Commission; the list goes on.

But it is not just climate that would be in the line of fire if the Supreme Court takes aim at unspecified agency powers. There would be effects on agencies’ authority over everything from vaccine mandates to internet neutrality.

As James Lucier at Capital Alpha Partners notes, such a move would open a Pandora’s Box of new cases.

“The amount of new litigation that might result from overturning the Chevron Doctrine, a cornerstone of administrative law for the past 40 years, could be enormous.”

It’s gearing up to be a big day. We’ll be tracking developments on ft.com. Watch this space. (Myles McCormick)

Data Drill

Soaring petrol prices haven’t changed Americans’ preferences for cars, suggests a new poll from Morning Consult. 

The data firm found that only 20 per cent of US adults were “very interested” in purchasing an electric vehicle within the next five years. This figure hasn’t changed since January, when prices at the pump were more than a dollar a gallon cheaper. 

Price, vehicle range, and lack of charging infrastructure remain the top barriers to EV attraction, according to Morning Consult. Electric vehicle prices averaged $64,338 in May, more than $15,000 higher than the average price for a new vehicle, according to Kelley Blue Book.

While EV sales are at record levels in the US, they make up less than 6 per cent of all vehicle sales. Petrol-guzzling trucks and sport utility vehicles still dominate sales. The White House wants half of all new vehicles sold to be electric by 2030, as well as a national network of 500,000 charging stations. 

On Tuesday, the Biden administration announced over $700mn in private sector commitments for electric vehicle charging. It follows $7.5bn in funding through the Bipartisan Infrastructure Law for a national charging network. (Amanda Chu)

Power Points