Court Turns Up the Heat on Global Warming

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"The ruling is a total rejection of the Bush Administration's refusal to use its existing authority to meet the challenge posed by global warming. It also sends a clear signal to the markets that the future lies not in the dirty, outdated technologies of yesterday, but in the clean energy solutions that will fuel the economy of tomorrow."

Congress Getting Involved

Momentum for federal legislation to curb carbon emissions has been growing in recent months. Major U.S. corporations are joining environmentalists' call for a federal cap in greenhouse emissions, underlining the need for both a uniform regulatory environment, and a reduction in the risks global warming poses to their businesses. In January, the heads of 10 large U.S. corporations, including General Electric (GE), said they supported mandatory caps. And in March, General Motors (GM), Ford Motor (F), Chrysler (DCX), and Toyota North America (TM) endorsed a mandatory economy-wide emissions cap.

Five bills in Congress currently call for a national cap on greenhouse gas emissions. On Mar. 20, Representative Henry Waxman (D-Calif.) used his moment at the mike to introduce the Safe Climate Act, which calls for 80% cuts from 1990 emissions levels by 2050.

But environmental groups say they don't see such far-reaching legislation until Bush is out of office. In the shorter term, today's Supreme Court decision will impact other similar court cases, especially those related to the auto industry. Automakers have brought suit against Clean Car Laws enacted by California and 13 other states. The states derive their authority to enact stricter standards from the Clean Air Act, so the high court's ruling is expected to strengthen the states' hand in cases pending in California and Vermont.

Helping Hand for the States

California has been asking the EPA for authority to limit tailpipe emissions since 2004, but the agency has yet to grant a state a waiver to do so. Ten other states have adopted California's tougher rules, which would force automakers to cut exhaust from cars and light trucks by 25% and from sport-utility vehicles by 18%, beginning with 2009 models.

At a news conference today, California Attorney General Jerry Brown said the Supreme Court ruling "makes it very clear that California has a right to regulate greenhouse gases." He added that, "It is time for the automakers, the electric power industry, and other large greenhouse gas emitters to join California in leading the world to global warming solutions."

The auto industry has said it supports federal carbon emissions legislation, but has resisted raising fuel economy standards. Instead, it has focused on producing flexible-fuel vehicles (see BusinessWeek.com, 3/28/07, "The Dirty Secret About Clean Cars"). The Alliance of Automobile Manufacturers, a defendant in the Supreme Court case representing GM, Ford, and DaimlerChrysler, issued a statement saying it would work for federal carbon-cap legislation, which could come at a lesser cost to the group's members than higher fuel economy standards.

"The Alliance of Automobile Manufacturers believes that there needs to be a national, federal, economy-wide approach to addressing greenhouse gases," says Dave McCurdy, president of the Alliance of Automobile Manufacturers. "This decision says that the U.S. Environmental Protection Agency will be part of this process."

Environmental advocates are optimistic that today's decision signals a change in legislative winds, though they don't expect major policy shifts overnight. "I expect new standards to result from this opinion," says Norman Dean, executive director of the environmental group Friends of the Earth. "How stringent they'll be in this environment is another matter."

Herbst is a reporter for BusinessWeek.com in New York.