North Carolina v. Environmental Protection Agency

In 2005, the Environmental Protection Agency (EPA) (defendant) adopted the Clean Air Interstate Rule (CAIR) with the purpose of reducing or eliminating the impact of upwind sources on out-of-state downwind nonattainment of the national ambient-air-quality standards (NAAQS) for two pollutants: fine particulate matter (PM2.5) and ozone. Sulfur dioxide (SO2) and nitrogen oxides (NOX) were precursors to one or both pollutants, and the EPA’s control measures under CAIR reduced emissions of SO2 and NOX through state implementation plans (SIPs). The EPA determined that 18 states and the District of Columbia (the upwind states) contributed significantly to out-of-state downwind nonattainment of the NAAQS for the pollutants and required the upwind states to reduce their emissions in two phases. The second phase began in 2015. North Carolina and other states were otherwise required under Title I of the Clean Air Act (CAA) to attain the relevant NAAQS by 2010. CAIR also created optional interstate trading programs for the pollutants. Each participating state received a budgeted “allowance” of permissible SO2 and NOX emissions and could choose to sell or purchase emissions credits from sources in other states. Trading was allowed without regard to whether it interfered with another state’s maintenance of the NAAQS. Each state’s budget of allowed SO2 emissions was tied to what was most cost-effective for the state to control, and a state was allowed greater NOX emissions if the state used more coal, meaning states that used more oil and gas were disproportionately burdened. North Carolina and other states (plaintiffs) petitioned the court to review CAIR, challenging various aspects of the program as inconsistent with § 110 of the CAA.