Supreme Court Decision in West Virginia v. EPA Casts Doubt on SEC’s Climate Proposal and Other Regulatory Initiatives

On June 30, 2022, the U.S. Supreme Court decided West Virginia et al. v. Environmental Protection Agency, holding that the EPA lacks authority under Section 7411(d) of the Clean Air Act to limit greenhouse gas emissions from power plants through “generation shifting,” i.e., increasing the use of cleaner energy sources like wind and solar and reducing the use of dirtier sources like coal.

Although the case centered on the interpretation of the EPA’s authority under the Clean Air Act, the Court’s reasoning could apply to other federal agency actions where an agency is seeking to issue significant new regulations. Indeed, questions have already arisen about the implications of the decision for the U.S. Securities and Exchange Commission, which, under Chair Gary Gensler’s leadership, has sought to establish a series of new regulatory standards, including its climate-related disclosure rule proposal and its efforts to regulate digital assets as securities.

This Legal Update provides a few initial observations on the practical impact of the WV v. EPA decision for the SEC on those two matters.