On November 15th, the Ninth Circuit vacated regulations published by the National Highway Traffic Safety Administration (NHTSA) establishing corporate average fuel economy (CAFE) standards for “light trucks” – sport utility vehicles, minivans, and some pickup trucks – manufactured in 2008 through 2011. Center for Biological Diversity v. NHTSA, No. 06-71891 (9th Cir. Nov. 15, 2007). One of the principal bases for the decision was that the agency failed to adequately analyze the potential climate change impacts of the regulations resulting from greenhouse gas emissions in its Environmental Assessment (EA) prepared pursuant to the National Environmental Policy Act (NEPA) – even though the regulations imposed more stringent fuel efficiency requirements than the current regulations, and were anticipated to result in reduced greenhouse gas emissions as compared to a baseline assuming no change in the standards.

The court vacated the rulemaking for two reasons directly related to greenhouse gas emissions. First, it held that NHTSA had acted in an arbitrary and capricious fashion in failing to monetize the benefits of reducing greenhouse gas emissions in its cost-benefit analysis used to determine the “maximum feasible fuel economy level” achievable, as required under the governing statute. The court cited numerous studies that had arrived at a monetized value for such benefits, and held that “while the record shows that there is a range of values, the value of carbon emissions reduction is certainly not zero.” This holding may have wide-ranging applicability, given the number of contexts in which the government uses cost-benefit analyses to set standards on regulated industries, and the number of industries which produce greenhouse gas emissions.

Second, the court held that NHTSA’s analysis in the EA of cumulative impacts related to greenhouse gas emissions was insufficient, because, while it estimated the total carbon emissions of light trucks under the new standards in comparison to the emissions if the new standards were not put in place, it did not “discuss the actual effects resulting from those emissions or place those emissions in context of other CAFE rulemakings for other vehicle classes.” The court further held that NHTSA should have examined alternatives that would set standards substantially higher and have greater environmental benefits with respect to greenhouse gas emissions. The court cited studies discussing the non-linear correlation between emissions and climate change, and a potential “tipping point” at which climate change impacts would become irreversible regardless of further emissions reductions.

This decision is noteworthy because environmental analyses under NEPA and its state cohorts typically focuses on the incremental impacts of a governmental action as measured against a baseline circumstance in which the proposed action is not taken. Here, however, the Ninth Circuit essentially held that a proper analysis should go beyond such a comparison to look at alternatives that would go beyond reducing growth in greenhouse gas intensity to consider more aggressive strategies for net reduction of greenhouse gases. The court did not offer any guidance on how the agency should determine what would constitute a significant impact for NEPA purposes, or in what circumstances NEPA would require the choice of a more stringent alternative.

According to statements made by the current commissioner of the New York State Department of Environmental Conservation, that agency is in the process of proposing changes to the State Environmental Quality Review Act regulations that would specifically require a climate change analysis in environmental impact assessments. Accordingly, it can be expected that climate change issues will be subject to a “hard look” under SEQRA for projects in New York.

If you have any questions about this decision, please feel free to contact Jeff Gracer at jgracer@sprlaw.com or Elizabeth Knauer at eknauer@sprlaw.com.