On April 2, 2007 the U.S. Supreme Court ruled 5-4 that the Environmental Protection Agency (“EPA”) has the authority to regulate greenhouse gas (“GHG”) emissions from motor vehicles as “air pollutants” under the Clean Air Act. Although the court left open the possibility that the EPA might decline to exercise its authority to regulate, given the sweeping nature of the court’s opinion and the EPA’s past statements about global warming, it appears almost certain that the agency will have to begin the rulemaking process.

Some commentators are saying the court’s decision on carbon dioxide/global warming won’t have much effect on EPA policy. They are likely mistaken. The decision could have enormous consequences, because it allows this or any future administration to use the Clean Air Act to regulate carbon dioxide and other GHG emissions without Congress having to specifically authorize such action.

The decision will affect much more than car and truck emissions. With the court’s ruling that GHG emissions fit within the Act’s “capacious” definition of “air pollutant,” the decision will certainly affect pending (and future) cases calling on the EPA to regulate GHG emissions under other sections of the Act, mainly those dealing with emissions from power plants and other industrial sources.

While the scope and details of the regulations will be decided over the next several years, several things likely will result from the court’s decision. One, not only will motor vehicle GHG emissions be regulated, but GHG emissions from power plants and other industrial sources will likely be as well, increasing energy and operating costs for businesses and homes throughout the country. Two, it will force American companies to meet emissions caps or purchase carbon credits under an emissions trading program, similar to the sulfur dioxide program established to fight acid rain. And third, rather than complying with GHG limits, some companies may move their operations to unregulated countries like India or China that have no GHG emissions controls, thereby lessening our competitiveness and harming the economy. (One of the arguments before the court was that the State of Massachusetts and others suing the EPA didn’t have standing to bring the case because any emission decreases achieved by new regulations would be overwhelmed by increases in unregulated Third World countries. The court rejected that argument, finding that regulating GHG emissions need not “reverse” global warming, but need only “slow or reduce it.”)

While much is uncertain as to the final details of future regulations, it is beyond doubt that GHG caps will have a significant effect on American companies. EPA regulations carry the force of law, and are enforceable not only by the government but also by citizen plaintiffs such as the Sierra Club and like-minded groups. Therefore, companies operating in the United States will be required to meet the GHG caps once they are finalized, or face EPA enforcement and the possibility of public interest litigation by environmental activists.

In contrast, among Kyoto signatories, European countries appear to be the only ones who have made the otherwise unenforceable Kyoto caps enforceable by enacting domestic limits. Even so, many European countries admit they will not be able to meet their individual Kyoto caps.

While anthropogenic climate change may be real—although many scientists claim the jury is still out—the costs of complying with climate change regulations will be completely real. How each company or industrial sector is affected, and how much GHG compliance costs companies will be able to pass on to consumers, remains to be seen.

The GHG rulemakings will be some of the most significant rulemakings the EPA has ever initiated. Each industry sector is well-advised to determine and advocate its best position in the rulemaking process and plan how it will comply with the final regulations.