The US Supreme Court on Thursday curtailed the Environmental Protection Agency’s (EPA's) powers to regulate carbon dioxide emissions from power plants, dealing a setback to President Joe Biden’s ambitious climate agenda.

Writing for the 6-3 majority, Chief Justice John Roberts said Congress never conferred to EPA the clear and expansive authority to “substantially restructure the American energy market” through control of carbon emissions.

Capping emissions at a level that will force a nationwide transition away from use of coal to generate electricity “may be a sensible solution to the crisis of the day,” he said, referring to climate change.

Even so, he asserted a decision by EPA of “such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”

In dissent, Justice Elena Kagan, wrote that the nation’s highest court was too narrowly interpreting Section 111 of the 1970 Clean Air Act that directs EPA to regulate stationary sources of any substance that “causes or contributes significantly to, air pollution” and that “may reasonably be anticipated to endanger public health or welfare.”

“The Court appoints itself – instead of Congress or the expert agency – the decision-maker on climate policy,” she wrote. “I cannot think of many things more frightening.”

Biden, in a statement, called the ruling “another devastating decision that aims to take our country backwards”.

At issue is whether the EPA under former President Barack Obama had authority to impose a “Clean Power Plan” in 2015 on all 50 states requiring them to transition from coal to cleaner electricity generation sources.

A year later, the Court prevented the plan from entering force without ruling on its legal merits. In 2019, Donald Trump’s administration replaced it with a rule that enabled older generators to remain in operation.

A federal appeals court struck down Trump’s rule in January 2021 soon after Biden took office. He directed EPA to devise a replacement for the Clean Power Plan that could come as soon as late this year.

“The court decision will necessarily narrow the contours of that replacement plan,” wrote Andrew Skroback, senior counsel at law firm Norton Rose Fulbright, in a note to clients.

The case clarified the limits of EPA’s authority and supported the so-called “major questions doctrine,” a legal approach that Congress must provide clear statutory authorisation to federal agencies before they decide an issue of major national significance.

Federal courts have generally deferred to the agencies in their interpretation of statutes granting them authority. Biden has promoted adoption of unusually expansive interpretations by both executive branch and independent agencies of their authority to address climate change and a range of other issues.

Those challenging EPA in West Virginia v Environmental Protection Agency are a coalition of coal producers and Republican-led states.

Today’s ruling limits EPA’s regulatory actions to addressing emissions on a plant-by-plant basis, effectively axing more sweeping approaches without some type of clear authorisation of Congress.

Use of EPA’s regulatory authorities for mitigation industry-wide has been a central aspect of White House efforts to place the US down a firm path to meet its 2030 Paris Agreement pledge to slash greenhouse gas emissions 50-52% from 2005 levels.

The court also ruled that EPA lacks authority to impose a cap-and-trade system on carbon or any other types of emissions, other than nitric oxide and sulfur dioxide.

The power sector accounts for about 24% of US greenhouse gas emissions behind transportation (27%) and industry (25%), transitioning the fastest to cleaner energy sources over the last seven years.

Despite the ruling, utilities will continue to phase out older coal and natural gas generators for cost, customer, environmental, equity, and other reasons. Still, the pace of change will be insufficient to achieve another Biden goal: a carbon-free electric grid by 2035, according to analysts.

There appears little chance that Congress will now give EPA clear and expansive authority expressed by the Court’s majority in its ruling to regulate the energy sector. Democrats with thin majorities in both houses seem too divided to act and Republicans have little interest in helping an agency they routinely accuse of regulatory overreach.

Democrats are also running out of time to get $300bn or so of proposed clean energy-related tax credits through Congress that would provide Biden’s climate ambitions with a huge boost.

Wide-ranging reaction to ruling

The precedent set in today’s ruling drew reaction from clean energy lobby groups, legal experts, the political spectrum, and Washington think tanks.

“The Court’s constrained view of the Clean Air Act prevents EPA from using what has long been recognised as the easiest, cheapest, and best way to reduce pollution in the power sector: switching from higher emitting plants to affordable, reliable clean power,” said Heather Zichal, CEO of the American Clean Power Association.

Greg Wetstone, CEO of the American Council on Renewable Energy, said his advocacy group is “deeply concerned” about the ruling and its broader repercussions.

When we should be using the most powerful tools in our toolbox to combat the climate crisis, the Supreme Court is blunting them.

“At a time when we should be using the most powerful tools in our toolbox to combat the climate crisis, the Supreme Court is blunting our key instruments,” he said.

John Begala, vice president of federal and state policy at the Business Network for Offshore Wind, called the ruling “a step backward.” He said the trajectory is clear. “States, utilities, and consumers are demanding more renewable energy to create jobs and combat climate change.”

The Heritage Foundation, an influential conservative public policy think tank, welcomed the ruling.

“Today, the Supreme Court has taken a major step to restore representative government and require legislators, not bureaucrats, to make the major policy decisions affecting the lives of Americans. The importance of this decision cannot be overstated,” said its executive vice president, Derrick Morgan.

Sasha Mackler, who leads the energy programme at the Bipartisan Policy Center, a think-tank focused on bipartisan policy solutions, said the ruling will have the “unfortunate” effect of increasing regulatory uncertainty at a time when greater clarity on a national climate policy is needed.

“Today’s court ruling only increases the importance of Congress adopting a pragmatic and effective long-term climate strategy,” he said.