By Valerie Volcovici
WASHINGTON, June 28 (Reuters Point Carbon) - An appeals court decision to uphold proposed federal greenhouse gas rules may shift the fight over regulating the heat-trapping emissions back to Congress, where lawmakers may step up efforts to diminish the EPA's power or renew efforts to set a price on carbon, experts said.
The U.S. Court of Appeals for the District of Columbia on Monday unanimously ruled that the Environmental Protection Agency's (EPA) finding that carbon dioxide is a public danger and the decision to set limits for emissions from cars and light trucks were legal.
The ruling upheld the underpinnings of the Obama administration's push to regulate carbon dioxide emissions, dealing a blow to the heavy industries including electric utilities and states like Texas who have sought to strip the EPA of its authority.
Despite the legal victory by the EPA, experts are expecting opponents to continue their challenge to the greenhouse gas regulations in Congress, where both industry and environmental groups are expected to try to torpedo or protect the controversial rules.
"As for more legal challenges, the various petitioners are still looking at their options, but I think they face an uphill battle," said Jeff Holmstead, head of the environmental strategies group at law firm Bracewell & Giuliani.
"The action will mainly shift to the Hill, and I think there will be an effort to limit or even eliminate EPA's authority to regulate greenhouse gases under the Clean Air Act," he added, referring to the existing law, which the EPA will expand to tackle carbon.
One opponent of the EPA's greenhouse gas rules said that after the court decision, Congress must pass bills that have been floated in the House and Senate to try to strip the EPA of its authority to use the Clean Air Act to regulate carbon.
"Congress now has a responsibility to reform the Clean Air Act to remove the deference most courts give to EPA's technical judgment and to refine the definition of air pollution in the act," said Kathleen Hartnett White, director of the Armstrong Center for Energy and the Environment at the conservative Texas Public Policy Foundation.
She said the Senate should follow the lead of the House of Representatives, which passed such a bill last year.
Bracewell's Holmstead said the upcoming presidential election will influence congressional action on the regulation.
Presumptive Republican nominee Mitt Romney has vowed on the campaign trail to weaken the EPA's use of the federal Clean Air Act for regulating greenhouse gases, while President Barack Obama said in an interview in April that climate change will be a big issue in the 2012 election.
Although an Obama win would not lead to a new attempt to pass comprehensive climate change legislation, it may lead to a discussion on implementing a carbon tax that could replace the EPA's greenhouse gas rules and help beef up weakening federal budgets, Holmstead said.
Others said that with the EPA given the green light to continue issuing its greenhouse gas regulations, industry may seek to push Congress to pass legislation that offers a market-based approach to reducing carbon instead of direct regulation.
"The ruling significantly reduces the regulatory uncertainty facing major emitters so they can begin factoring carbon reductions into their investment decisions," said Paul Bledsoe, senior advisor to the Bipartisan Policy Center.
He said that once the EPA rolls out the suite of new regulations, industry will realize that complying with the rule will be expensive, which may push lobby groups to lobby Congress to adopt market-based approaches to curb carbon.
"Given that certainty, will Congress be keen to engage in much cheaper regulatory approaches?" he said.
In the meantime, the Clean Air Act will continue to fill the void left by Congress' failure to enact a comprehensive energy and climate change bill.
EPA Administrator Lisa Jackson told Reuters last Friday on the sidelines of the Rio+20 U.N. sustainable development conference in Brazil that she was confident the court would uphold the greenhouse gas regulations.
She said President Obama supports the EPA's ongoing work to address greenhouse gas emission in spite of constant challenges by Republican lawmakers.
"I've said all along - that I believe the Clean Air Act is the statute that allows the kind of flexibility that allows us to make reasonable common sense steps toward a lower carbon future, and in the absence of a new law, which is definitely something the president champions, it is a great tool in the toolkit," she said.