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Michigan v. EPA: The EPA Must Consider Costs in Emission Limits

On June 29, in a 5-4 decision, the United States Supreme Court held in Michigan v. EPA that the Environmental Protection Agency (EPA) must consider the costs of industry when deciding to set limits under the Clean Air Act on the emissions of hazardous air pollutants from certain stationary sources such as power plants. The decision, written by Justice Scalia, reversed the decision of the D.C. Court and held that ignoring costs was unreasonable.

The EPA had estimated that the cost of its regulations to power plants would be $9.6 billion per year, and estimated that the benefits from the resulting reduction in emissions would be between $4 million to $6 million each year. However, the EPA conceded that its cost analysis had “played no role” in finding that its regulation was appropriate and necessary. The Court held, “The Agency must consider cost – including, most importantly, cost of compliance – before deciding whether regulation is appropriate and necessary. We need not and do not hold that the law unambiguously required the Agency, when making this preliminary estimate, to conduct a formal cost-benefit analysis in which each advantage and disadvantage is assigned a monetary value. It will be up to the Agency to decide (as always, within the limits of reasonable interpretation) how to account for cost.”

The Court remanded the EPA’s mercury and air toxic standards (MATS) to the D.C. Circuit for further proceedings consistent with the opinion.

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