Greetings:

The Obama administration's Clean Power Plan is arguably the most significant environmental regulation to come out of Washington in decades. The CPP calls for dramatic reductions in greenhouse gas emissions from the power sector, and has been hailed as proof of America's commitment to combating climate change. But a rare move by the Supreme Court has halted implementation of the CPP and created significant uncertainty for the future of U.S. energy and environmental policy.

A Rare Stay

It was not surprising that many states brought a legal challenge against the Environmental Protection Agency's CPP regulations as soon as the rules were finalized. The CPP calls for a 32% reduction in greenhouse gas emissions from the nation's power plants by 2030 (with 2005's emissions used as the starting point). That's bound to require expensive changes, such as closing coal-fired power plants, revving up the use of renewable power and boosting energy efficiency. More than 20 states sued the EPA on the grounds that the agency doesn't have the legal authority under the Clean Air Act to impose such sweeping changes. (We take no sides on that legal question, or on any of the other arguments over the CPP.)

The surprise came from the Supreme Court, which in a 5-4 ruling ordered the EPA to suspend implementation of the rules until the Court has had a chance to hear the challenge brought by the states. That was remarkable because a lower federal court was still considering the case, and the Supreme Court almost always waits for cases to work their way up to its docket before intervening. Clearly, five of the Court's justices believed there was a very compelling reason to keep the CPP from going forward before the legal questions are resolved at the highest level.

But now, the rule's fate before the Supreme Court is in doubt because of the recent passing of Justice Antonin Scalia, who was widely seen as a reliable "no" vote against the CPP. Meanwhile, Senate Republicans seem determined not to consider any nominee President Obama might put forward to fill the vacancy left by Scalia. So what does an eight-justice Court mean for the power plant regulations?

The Road Ahead for the CPP

Don't expect the Court to end the suspense over the power plant rules anytime soon. Nothing will happen until the U.S. Court of Appeals for the D.C. Circuit hears the challenge brought against the EPA in June and issues its own ruling later in the summer.

According to Patrick Parenteau, an environmental law professor at Vermont Law School, the D.C. Circuit is likely to uphold the CPP. "Overall, it's a great panel for the EPA" to win its case, he says.

Assuming an initial win for the government, the states challenging the CPP can then ask the Supreme Court to take up the case. But that probably won't happen until the spring of 2017, says Jeff Holmstead, a former EPA assistant administrator under President George W. Bush and now an attorney with the firm of Bracewell in Washington, D.C.

How might the Supreme Court rule? Both Parenteau and Holmstead agree that the odds of the Court striking down the regs decreased with the death of Justice Scalia. Holmstead estimates that, with Scalia, the challengers had a 95% chance of success, but "how to understand the case has changed" with only eight justices, who could split 4-4.

If the Court is deadlocked, the EPA effectively wins by default. In that scenario, the opinion of the lower court stands, though the decision does not set a legal precedent the way a normal Supreme Court ruling would.

The Political Angle

Whatever the Court does, voters will have a big say on the CPP. The next president will be able to implement the rules as written, modify them or nix them entirely. And it's a good bet that pretty much any GOP candidate currently in the running would pull the plug on the CPP. Republican front-runner Donald Trump has suggested that he would make big cuts to the EPA's budget if he is elected president, which certainly wouldn't bode well for the future of the CPP.

By contrast, Democratic front-runner Hillary Clinton would almost certainly implement the power plant rules as written by the Obama EPA. Moreover, she'd probably appoint a more liberal justice to fill the Scalia vacancy, thereby creating five likely votes to uphold the regulations.

Along with everything else riding on the 2016 election, add in the Clean Power Plan. A GOP victory would render any court decisions moot. A Clinton win would means the regs likely stay in place.

Meanwhile ...

Although the Supreme Court stayed the EPA's hand, progress on the CPP's goals is continuing. At least five states (California, Colorado, New York, Virginia and Washington) say they'll voluntarily continue to implement the rule, never mind the Supreme Court's stay. And, more generally, the carbon intensity of the U.S. power sector (that is, the amount of carbon dioxide produced for each unit of electricity generated) is bound to drop in the near term. Why?

Coal consumption will keep falling, as it did dramatically last year. Based on Department of Energy data for the first 11 months of 2015, we figure that the U.S. burned less coal last year than at any time since the mid-1980s, as utilities dealing with other clean air regulations switched to cleaner burning (and cheap) natural gas. Data on direct coal consumption for 2016 aren't available yet, but statistics from the Association of American Railroads show that trains hauled 27% less coal this past February than they did in February 2015. In January, the year-over-year drop was 33%. This strongly suggests that coal consumption is still plummeting after a very weak 2015.

And renewable power generation continues to soar. The Department of Energy expects about 26 gigawatts of generating capacity to come on line this year, based on announcements from utilities. Solar leads the way with about 9.5 gigawatts of utility-scale projects, three times the amount installed last year. Natural-gas-fired plants rank second, with 8 gigawatts of planned capacity, followed by wind turbines at 6.8 gigawatts.

The bottom line: A rising share of generation will come from low- or zero-emission sources, which is more or less what the CPP aims to achieve.

Sincerely,

Jim Patterson

jpatterson@kiplinger.com

P.S. -- You may also be interested in these related articles on Kiplinger.com:

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P.S. Don't hesitate to write me, directly with questions or comments about any of the topics we cover, or anything else energy related. You can find previous issues of Kiplinger's Energy Alerts or Kiplinger's Tech Alerts here.