## Facts

- Public-health organizations, numerous states and municipalities, and other petitioners sought review of EPA’s 2019 Affordable Clean Energy (ACE) Rule and EPA’s repeal of the prior Clean Power Plan (CPP) regulating CO₂ from existing power plants under Clean Air Act (CAA) § 111(d).
- CAA § 111 requires EPA to determine the “best system of emission reduction” (BSER) for existing sources in a source category and to issue guidelines that inform state plans and emissions standards.
- The CPP identified a BSER that included: (1) heat-rate improvements at coal plants, (2) shifting generation from higher-emitting coal to lower-emitting natural-gas units, and (3) shifting generation toward zero-emitting renewable sources; the latter two relied on “generation shifting” across the electricity grid.
- The ACE Rule repealed the CPP and replaced it with a BSER limited primarily to heat-rate improvements at coal-fired plants, based on EPA’s view that BSER must be limited to measures applied “at and to” an individual source.
- The ACE Rule also amended implementing regulations in ways the court described as slowing emissions reductions and did not address CO₂ emissions from certain other fossil-fuel-fired units.

## Issues

1. Whether CAA § 111(d) unambiguously limits BSER to measures that can be implemented only “at and to” an individual source, thereby excluding generation-shifting approaches.
2. Whether EPA lawfully repealed the CPP as beyond statutory authority and adopted the ACE Rule on the premise that repeal was compelled by the statute.
3. Whether aspects of the ACE Rule, including implementing-regulation amendments, were arbitrary and capricious under the Administrative Procedure Act.

## Decision

- The court vacated the ACE Rule and vacated EPA’s repeal of the CPP, remanding to EPA for further proceedings.
- The court held EPA’s interpretation that § 111(d) unambiguously foreclosed generation shifting was incorrect, and the agency’s reliance on that premise tainted both the CPP repeal and the ACE replacement.
- The court further held that ACE’s amendments to the regulatory framework intended to slow the emissions-reduction process were arbitrary and capricious.

## Legal Principles

- Under CAA § 111(d), BSER is not unambiguously confined to measures applied only at an individual facility; EPA may consider broader “system” approaches where consistent with statutory factors (including cost and other considerations).
- An agency may not repeal an existing rule on the asserted ground that the statute clearly forbids the prior approach when the statutory text does not compel that limitation.
- Rules and regulatory amendments must reflect reasoned decisionmaking; agency actions that slow emissions reduction without adequate justification may be set aside as arbitrary and capricious.

## Conclusion

The D.C. Circuit set aside EPA’s ACE Rule and the CPP repeal because EPA wrongly treated CAA § 111(d) as clearly restricting BSER to on-site measures and, based on that error, failed to engage in a lawful and reasoned evaluation of permissible emissions-reduction systems and implementing regulations.


Am. Lung Ass’n v. EPA, 985 F.3d 914 (D.C. Cir. 2021)