April 28, 2021

What to Expect from Federal Climate Policy in 2021

Abby Fox

Climate change, once largely relegated to scientific and advocacy circles, has manifested itself with an increasing degree of frequency on the national political scene. In recent years, some level of activity on climate issues has played out in all three branches of government. Against this backdrop, the events of 2020—most significantly, the general election—have brought about changes in political dynamics with the potential to impact climate policy considerably. Here’s what to watch for in 2021.

In recent years, some level of activity on climate issues has played out in all three branches of government.

In recent years, some level of activity on climate issues has played out in all three branches of government.

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Congress. For years, legislators have sought passage of a comprehensive national climate bill. But despite widespread recognition that legislation is the most robust and least litigious tool for addressing climate change, this goal has remained elusive. Indeed, Congress’s failure to advance a legislative climate solution was a central driver of the Obama administration’s efforts to effect sweeping climate action through executive and regulatory action.

Since the Democrats took back the House in 2018, they have put forth a number of climate bills, none of which have passed the Senate. In September 2020, the House passed the Clean Economy Jobs and Innovation Act, H.R. 4447, which, though not technically a climate bill, channels investment into clean energy innovation programs and creates a foundation for future energy and climate legislation. But the viability of any subsequent efforts to advance climate policy through Congress may be limited by the balance of power, which is likely to remain under split party control. Without a Democratic majority in the Senate, passage of a comprehensive climate bill remains unlikely.

The U.S. Environmental Protection Agency (EPA). During the Trump administration, the EPA has pursued an aggressive agenda, seeking to “suspend, revise, or rescind [regulations] that unduly burden the development of domestic energy resources,” including limits on carbon dioxide emissions from the electricity sector. The Affordable Clean Energy Rule, 84 Fed. Reg. 32,520 (July 8, 2019), which replaced the now-defunct Obama-era Clean Power Plan, instructs states to set efficiency-based emission limits for individual coal-fired power plants, in lieu of the cap-and-trade program established in the Clean Power Plan.

The Biden administration is likely to swing back in the direction of the Obama EPA, and, potentially, to surpass it. Among Biden’s stated goals are achieving a carbon pollution–free power sector by 2035 and reaching net-zero emissions no later than 2050. Biden’s nominee to serve as EPA administrator, Michael Regan, has voiced his commitment to prioritizing climate issues. In addition, the Biden administration will have the benefit of former EPA Administrator Gina McCarthy serving as “climate czar” to oversee implementation of its climate agenda. However, while the potential for sweeping climate action under a Biden EPA is very real, any major climate plan it puts forth without the backing of new legislative action will undoubtedly meet with legal challenges, thus ultimately leaving its fate to the courts.

The Federal Energy Regulatory Commission (FERC). FERC is a relatively new player in climate issues. Yet over the past few years, FERC has been at the forefront of a heated debate on the federal–state policy balance with direct implications for climate policy efforts. As an increasing number of states adopt greenhouse gas emissions targets and renewable energy standards, FERC has imposed measures that increase the bid prices of renewable resources to counteract perceived subsidies resulting from such policies. These decisions have been met with widespread criticism by supporters of clean energy and decarbonization, which see them as an intrusion on states’ ability to set their own energy policy goals. While FERC will retain a Republican majority until mid-2021, under the leadership of a Democratic chair—and, eventually, a Democratic majority—FERC may have the opportunity to reverse course on these issues.

Even before the change in administration, there were indications that climate issues would assume a more prominent role at FERC. At least one FERC-regulated market is actively developing a plan to institute a carbon price, while offer prices in several organized markets include carbon prices that reflect regional cap-and-trade schemes. In September 2020, FERC, then led by Republican Neil Chatterjee, held a widely attended conference on carbon pricing. While speakers offered varying opinions as to whether FERC could, on its own initiative, require the adoption of a carbon price, virtually all speakers agreed that it has the authority to approve a carbon price submitted to it in its “passive and reactive role” under section 205 of the Federal Power Act. See City of Winnfield v. FERC, 744 F.2d 871, 876 (D.C. Cir. 1984). In October, FERC issued a policy statement confirming this position and encouraging jurisdictional markets to develop and submit rules that incorporate state-determined carbon prices. A return to Democratic leadership, and an eventual Democratic majority, could further advance FERC’s role in the climate arena.

The Supreme Court. In 2007, the Supreme Court issued its landmark decision in Massachusetts v. EPA, 549 U.S. 497 (2007), establishing EPA’s authority to regulate greenhouse gas emissions. Since then, the composition of the Supreme Court has shifted, and the recent addition of Judge Amy Coney Barrett as a sixth conservative justice almost certainly cements opposition to the more expansive readings of the Clean Air Act favored in Massachusetts. Thus, should a Biden climate policy be met with a legal challenge, or should other circumstances arise that reopen the findings of Massachusetts, the Court will have the opportunity to sharply limit the scope of EPA’s climate regulation authority.

A conservative with ties to the oil industry, Justice Barrett is unlikely to support expansive executive action on climate. As an avowed textualist, she is expected to take a narrow view of agency authority to address issues, such as climate change, that are not explicitly contemplated by statute. Still, most predictions regarding Justice Barrett’s views on climate are speculative in nature. At her confirmation hearings in October, Justice Barrett largely deflected questions related to climate change, and given her long tenure at Notre Dame and relatively brief tenure on the bench, Justice Barrett has yielded a limited sample of decisions from which to divine her leanings.

After a tumultuous 2020, the national political landscape has reached a relative state of repose. At this juncture, the issue of where federal climate policy will land in 2021 may well depend on the Biden administration’s determination on where to focus its efforts. Yet regardless of how things play out in 2021, it is clear that climate issues have become a prominent issue in the federal policy world and will likely remain so for years to come.

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Abby Fox

Ms. Fox is an associate in Balch & Bingham LLP’s Birmingham, Alabama, office and a member of the Energy Practice Group. She may be reached at afox@balch.com.