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What the US Supreme Court decision in West Virginia v. EPA means for climate policy and innovation

Photo by Zach Camp on Unsplash

By Damon Silvers

A t the end of last month, in a decision no one found surprising, the US Supreme Court ruled that the Environmental Protection Agency (EPA) did not have the statutory authority to make rules that had “major” policy effects, and thus did not have the authority to make a rule governing carbon emissions by the US power grid as a whole, but was limited to making plant by plant rules.

This decision was grounded in a Constitutional doctrine invented by the current Court majority and its immediate predecessors since 2000 — the “major questions” doctrine. This work of right wing legal imagination is designed to prevent the modern US federal government from functioning when it is most urgent that it does. And as such it can be seen as a major obstacle to effective public policy in relation to innovation in the world’s largest economy..

And yet at the same time this effort to cripple regulation based innovation policy in the world’s largest economy really should lead policymakers to face the reality that regulation by itself is ineffective innovation policy — that regulation must be paired with public investment for innovation policy to succeed, and nowhere is this more urgent than in climate policy.

While the West Virginia case is a product of the somewhat unique structure of the US Constitution, the lessons from it in terms of the relationship of states to the shaping of markets and the possibilities for innovation are global.

To understand why this is true, and why the West Virginia decision is an act of wanton destruction legally, one has to understand a bit about the history of the US regulatory state. Starting in the early 20th century, the US Congress recognized that the speed, scale and complexity of modern society was such that it could not be governed day to day by the Congress itself — that effective governance required executive branch bodies with general public interest mandates but with the authority and flexibility to respond to changing circumstances and technologies, and in particular to respond to efforts by regulated entities to thwart the agencies’ public interest goals. The goals of these agencies were almost universally market-shaping goals, particularly around issues like information, externalities and market power. In foundational statutes like the Food Safety Act, the Securities Act and the Clean Air Act, the US Congress defined broad public interest goals — “safe food,” “fair securities markets,” “clean air,” and then granted regulatory agencies broad powers to achieve those goals by issuing and enforcing regulations.

“The goals of these agencies were almost universally market-shaping goals”

The markets the agencies were charged with policing were, and are, at the core of the US political economy and society — markets for food, for capital, for information. In the case of the Environmental Protection Agency, its charge is the entire economy — any source of pollution. But the key thing to understand is that in every case where Congress established a regulatory agency, it gave that agency a broad set of ends consistent with shaping markets in the public interest. But to do that shaping, the agency by definition has to make decisions with “major” policy effects, and to do so without explicit Congressional instruction. In fact the point of these agencies is to be able to act quickly and with expertise to shape markets WITHOUT explicit Congressional instruction.

So the post Bush v. Gore Supreme Court’s invention of the “major questions” doctrine, and its typically nasty toned attack on agencies’ assertion of “extravagant statutory power over the national economy” is in fact an effort to destroy the ability of American democracy to govern the American economy. For what else is fulfilling Congress’ mandate to keep food safe, the air clean, or the capital markets fair but a grant of “extravagant statutory power over the national economy?” And what is the alternative to such “extravagant statutory power” but a plutocracy where the people are poisoned and cheated to feed the greed of billionaires and the climate hurtles toward an unmanageable and unimaginable catastrophe?

From the perspective of innovation policy, the West Virginia case articulates a view of the state that is essentially forbidden to engage in effective innovation policy, unless it does so by explicit legislative act. For what is meaningful government innovation policy other than policy that fosters large scale, economy wide change, government acts with major policy implications?

But at the same time, there is a way that the Supreme Court decision should focus policymakers and climate change advocates on a reality about innovation policy. Regulation is simply not enough, particularly not enough for an emergency like climate change. And in this sense, from the perspective of the climate change deniers and the lobbyists for the coal and oil companies in the US, the horse is out of the barn and cannot be put back in.

In September, the US Congress passed a $1.2 trillion infrastructure package, which included massive investments in reducing the carbon intensity of the US economy. The Biden administration estimates that this bill alone will bring the US 50% of the way to meeting its Paris Climate Accords commitments over the ten years in which the investments will be made.

And the investments needed to get the US the other half of the way are part of the investment package that is currently the subject of negotiations among Senate Democrats in the hopes of getting Senator Manchin, who blocked the package in December, to support a modified package. This morning, after months of statements indicating support for these investments, Manchin now says he opposes them. This is a brutal lesson in the consequences for American society and for human civilization of the decline of the labor movement in places like West Virginia — because while Manchin’s corporate friends oppose the investments and the taxes that would pay for them, the Biden plan would involve huge blue collar job creation in West Virginia. Of course though this fight is not over, and it is a fight that makes clear that first and foremost innovation is not an issue of regulation or even of technology — it is an issue of politics.

Because while the Supreme Court seeks to paralyze regulatory policy, the real game in terms of whether the US will play its part in fighting climate change is going to be an issue of direct investment. That question in the United States is going to be resolved in Congress and in elections, not at the Supreme Court.

Effective innovation policy at the speed and scale that the climate crisis requires is an issue fundamentally of direct investment combined with policies that address the externalities of climate change.

Since the 1980’s innovation policy in the countries most affected by neoliberalism has been handcuffed by a set of ideological dogmas masquerading as empirical observations. Key among these dogmas was the belief that markets were better at processing information and making decisions in the public interest than institutions or democratic processes. A related dogma was the assertion that public policy should be limited in the tools it uses to tax policy and light touch regulation, so called “nudges.”

Ironically, the US Supreme Court seeks to take away even these limited tools. That effort is destructive and lacks a foundation in law, but it should lead those who actually want to promote the innovation we need to fight climate change, stabilize world food supplies, and realize the UN’s Sustainable Development Goals to cast aside neoliberal dogmas and make use of the full suite of policy tools that states actually have, most importantly direct public investment.

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UCL Institute for Innovation and Public Purpose

UCL Institute for Innovation and Public Purpose

Changing how public value is imagined, practiced and evaluated to tackle societal challenges | Director: Mariana Mazzucato | Deputy Director: Rainer Kattel