Greenhouse Gas Regulation under the Clean Air Act: Does Chevron v. NRDC Set the EPA Free?

The EPA is likely to face a big legal problem on the path to regulating greenhouse gases under the Clean Air Act (CAA). Actions the agency is taking now will likely set it on a mandatory path toregulation of GHGs under the comprehensive “National Ambient Air Quality Standards” (NAAQS) program—a scheme that almost everyone who has studied the CAA thinks is a very poor fit for GHG regulation and which blocks use of arguably more effective schemes within the CAA. Unless the EPA can win a lawsuit challenging an interpretation of the CAA that has stood for more than 30 years, or Congress explicitly takes away the agency’s authority to set a GHG NAAQS with new legislation, the agency will have to navigate the complex NAAQS process—with potentially large effects on the efficiency andeffectiveness of GHG regulation.

EPA regulation of greenhouse gases is looking increasingly likely. Congressional action has stalled while the agency has moved ahead, most recently with an “endangerment finding” released in December that allows regulation of GHGs from cars and trucks.

In a new RFF discussion paper, Visiting Scholar Nathan Richardson discusses the legal and policy implications of this endangerment finding for U.S. and EPA climate policy. In the paper—Greenhouse Gas Regulation under the Clean Air Act: Does Chevron v. NRDC Set the EPA Free?—Richardson argues that the finding might result in litigation that would force EPA to regulate GHGs through a Clean Air Act program (the National Ambient Air Quality Standards or NAAQS) that even most environmental groups feel is a poor choice for regulating carbon emissions.

EPA believes it has discretion to avoid this path and would win any challenge by relying on the deference shown to agencies under the famous Chevron v. NRDC precedent set by the Supreme Court. In the paper, Richardson argues that EPA’s confidence in its discretion might be misplaced—the language in the Clean Air Act on which EPA relies was reviewed by federal courts more than 30 years ago and found not to give the EPA the freedom it claims. A court ruling on the issue today would probably reach the same result, Richardson argues, regardless of the Chevron precedent.

If true, this could have serious implications for the efficiency and effectiveness of EPA climate regulations and might put additional pressure on Congress to act—either by granting discretion to EPA explicitly or by passing climate legislation that would supersede agency authority entirely.