On February 9, the U.S. Supreme Court delivered a major setback to the Obama Administration’s efforts to curb emissions of carbon dioxide from existing power plants in the U.S. In a 5-4 split decision, the Court granted several applications to stay the effectiveness of the U.S. Environmental Protection Agency’s (EPA) Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units, 80 Fed. Reg. 64,662 (October 23, 2015) (the Clean Power Plan). States, utilities and other electric industry parties petitioning the Clean Power Plan before the U.S. Court of Appeals for the D.C. Circuit sought the stay after the appeals court denied a similar request. For the Supreme Court to stay a regulation being litigated at the D.C. Circuit, despite the appeals court denial, is a nearly unprecedented move that some believe signals the ultimate fate of the Clean Power Plan.

The immediate impacts of the Supreme Court’s order are clear. The effectiveness of the Clean Power Plan and all of its various deadlines and other requirements has been suspended, and will not have any effect unless and until (1) the rule is upheld at the D.C. Circuit and the Supreme Court denies to hear a further appeal; or (2) the Supreme Court takes up an appeal, but ultimately upholds the Clean Power Plan. In the short term, this means States are not required to meet the September 6, 2016, deadline for submitting an initial state implementation plan.

As for the related federal implementation plan and model trading rules, which remain in the proposal stages (and therefore not subject to legal challenge), the comment period has since closed, and the EPA may well continue efforts to finalize them. The EPA also has indicated that it will continue to work with the States and other stakeholders that choose to prepare implementation plans.

The long-term implications are less certain. Clearly from the stay, a majority of the Supreme Court Justices believes that there is a good argument that the current Clean Power Plan is legally flawed and is causing immediate and irreparable harm to States and the regulated community (a finding necessary for the issuance of a stay). The Court’s order does not indicate, however, whether the Clean Power Plan is legally flawed and must be struck down or whether it merely suffers from a procedural defect that could be remedied on remand. At a minimum, the Court’s order likely will prompt closer scrutiny from the D.C. Circuit. It also suggests that, if the D.C. Circuit does uphold the Clean Power Plan, the Supreme Court will be willing to take the case on appeal.

Going forward, the Court’s stay is expected to slow or even halt implementation planning in many states, though efforts by States supportive of the rule are likely to proceed. Regulated entities should be aware that the stay is only interim relief and does not guarantee that the Clean Power Plan will be struck down. If the EPA ultimately prevails in having the Clean Power Plan upheld, all relevant compliance deadlines will be readjusted. It is likely that the extensions will correspond roughly with the duration of the stay, but the EPA will ultimately propose new deadlines for court approval. Depending on how long the Clean Power Plan is litigated, more substantive adjustments to the EPA’s assumptions and calculations underlying the rule also may be necessary.