Supreme Court Climate Ruling Adds Obstacles to SEC Policies

In Thursday’s 6-3 decision, the court said the Obama-era EPA exceeded its authority when it devised the Clean Power Plan, a regulatory approach to reducing carbon pollution from power plants.

Republican Sen. Pat Toomey of Pennsylvania says the climate decision is a win for the democratic process.
PHOTO: CHIP SOMODEVILLA/GETTY IMAGES

Elaborating on earlier decisions, the high court said regulations that have sweeping economic and political impact should be invalidated unless Congress has clearly authorized action by an agency.

The justices laid out factors for lower courts to consider when deciding if a “major question” is implicated by a regulation, and the breadth of the doctrine is likely to be clarified in future Supreme Court cases, attorneys said. In dissent, Justice Elena Kagan wrote that the Obama administration EPA had exercised broad authority given to it by Congress.

“Any administrative agencies that are proposing to reinterpret their statutory authority to do novel things are potentially affected by this,” said Jonathan Brightbill, a former Justice Department lawyer now at the firm Winston & Strawn.

By expanding on this major-questions principle, the court created a road map for lower courts to strike down other regulations in the years to come.

The ruling could also put pressure on lawmakers to lay out policies more specifically and clearly delineate agencies’ authority, rather than allowing regulators to interpret legislation and advance major policies.

Eugene Scalia, who was labor secretary in the Trump administration, said financial regulators are crafting new rules “custom-built to fail in court” absent major changes.

“The SEC, FTC and other agencies are making novel use of old statutes to make big, sweeping policy changes—which is exactly what the Supreme Court has said it would review very, very skeptically,” said Mr. Scalia, a lawyer who has represented financial firms in challenges to regulations.

Business and financial-industry groups that have challenged prior regulations, including the U.S. Chamber of Commerce, said Friday that they were still reviewing the decision.

While President Biden campaigned on an aggressive climate agenda, much of the administration’s effort to address global warming through legislation has stalled in Congress. That has put greater pressure on regulatory agencies to deliver on a core Democratic priority.

The SEC has a pending proposal that would force publicly traded companies to tally their impact on the environment and the risks they face from climate change. The proposal would force publicly traded companies to report greenhouse-gas emissions from their own operations as well as from the energy they consume, and to obtain independent certification of their estimates. In some cases, companies would be required to report greenhouse-gas output from their supply chains and consumers, known as Scope 3 emissions.

Source: WSJ