Down with regulation, up with uncertainty

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NEW YORK, July 1 (Reuters Breakingviews) - American watchdogs have just been declawed. The Supreme Court on Thursday slapped down the U.S. Environmental Protection Agency, and warned regulators of all stripes to not make rules on big issues when the law doesn’t clearly tell them to. This will lead to three outcomes: regulators will make fewer rules, Congress will find it even harder to pass legislation, and the private sector’s future will get fuzzier.

The specifics centered around the Obama administration’s Clean Power Plan, which told states to reduce carbon emissions, allowing increased coal efficiency or a shift towards more clean energy. Coal companies and Republican-leaning states argued specific choices were for lawmakers, and not regulators, to authorize. The Supreme Court has agreed. Oddly, this is all theoretical, because the plan was never put into effect.

This has knock-on for many kinds of regulation because of the so-called major questions doctrine. Chief Justice John Roberts said, citing that theory, that if regulators want to make a rule that affects important aspects of Americans’ lives, they must wait for clear instructions from Congress. The court’s conservative-tilted majority opined that the EPA’s plan usurped the legislative branch’s power.

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Such gaps in the law are commonplace, though. Congress has long crafted laws that effectively leave it up to agency experts on how best to minimize pollution, protect investors, allocate spectrum and set nuclear power safety standards.

Now, there will be less room for such constructive ambiguity. As a result, regulators are likely to reallocate their resources. They will make fewer rules, and spend more time enforcing existing ones. As for the legislative branch, it will have to be more specific in making laws – which in practice means those laws will face even more difficulty than they already do in passing a divided Congress. Specificity will also result in legislation that swiftly goes out of date as science, technology and economic ability advance.

Is this a win for businesses? Some, like coal producers, may celebrate clawless watchdogs. But the private sector needs clear guidelines that allow for predictable investments, and regulation can create barriers to entry that protect against newcomers. A world with fewer rules isn’t a world with fewer worries.

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CONTEXT NEWS

In a 6-3 ruling, the U.S. Supreme Court limited the options available to the Environmental Protection Agency in curbing greenhouse gases. The Court ruled the EPA can regulate emissions of specific power plants, but under the “major questions” doctrine, Congress did not clearly delegate authority to the agency to use broader methods, such as encouraging a shift in power production to cleaner sources.

Under the doctrine, on issues of economic or political significance, regulators’ powers are limited to those explicitly delegated by Congress.

The case involved regulations proposed by the Obama administration, called the Clean Power Plan, which was never put into effect. A group of coal companies and Republican-led states such as West Virginia sued to clarify limits on EPA regulation.

In a dissenting opinion, Justice Elena Kagan said the Court is preventing congressionally authorized agency action to curb emissions. She added that “the Court appoints itself—instead of Congress or the expert agency—the decisionmaker on climate policy.”

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Editing by John Foley and Amanda Gomez

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