An initial read of the 9th Circuit's ninety-page opinion in Center for Biological Diversity v. National Highway Transportation Safety Administration indicates that the three-judge-panel's opinion truly was a stunning decision from the states' perspective.
Plaintiffs' argument rested on the assertion that CAFE standards for light trucks in model years 2008-2011, set by NHTSA in April 2006, should be invalidated for violating both the Energy Policy Conservation Act (EPCA) and the National Environmental Policy Act (NEPA). In addition to agreeing that the agency conducted an inadequate environmental assessment under NEPA, the court found that NHTSA's regulations violated EPCA in four key areas:
NHTSA's failure to monetize the value of carbon emissions in its determination of the MY 2008-2011 light truck CAFE standards, failure to set a backstop, failure to revise the passenger automobile/light truck classicfications, and failure to set fuel economy standards for all vehicles in the 8,500 to 10,000 lb. GWR class, was arbitrary and capricious and contrary to the EPCA. We therefore remand to NHTSA to promulgate new standards consistent with this opinion as expeditiously as possible and for the earliest model year practicable.
Note that the "passenger automobile/light truck classifications" referred to by the court constitute the notorious "SUV loophole," which allows auto companies to classify vehicles intended to carry passengers as trucks, which are subject to looser fuel-efficiency requirements. Congressman Ed Markey (D-MA), Chairman of the House Select Committee on Global Warming and Energy Independence, certainly does in focusing part of his reaction-- which humorously applauds the court for "killing this regulatory turkey so close to Thanksgiving"-- on that issue.
However, we'll focus first (after the jump) on the other highlight mentioned by Markey, namely a ruling about cost-benefit analysis for CO2 emissions that deems NHTSA's rules overly friendly to the auto industry.
In this section of the ruling, the court cites Massachusetts v. EPA for noting that "the scientific understanding of climate change [has] progressed" since the 1970's, when the last relevant case law affecting NHTSA's analysis was ruled on. Adding that "what was a reasonable balancing of competing statutory priorities twenty years ago may not be a reasonable balancing of those priorities today," it strikes down a process that effectively put, "a thumb on the scale by undervaluing the benefits and overvaluing the costs of more stringent standards." The Sierra Club's Pat Gallagher directly echoes this passage and notes the implications in reacting to the decision:
NHTSA is free to use a cost-benefit analysis to set fuel economy standards, but today the court told them they cannot put a thumb on the scale by continuing to ignore the costs of failing to act on global warming.
Overall, the court declares, simply put, that "there is no evidence to support NHTSA's conclusion that the apppropriate course was not to monetize or quantify the value of carbon emissions reduction at all"-- particularly when it did take pains to account for the purported employment and sales impacts that stricter standards might have on automakers.
In other words, the decision-making process was, legally speaking, an arbitrary and capricious effort that ignored fundamental statutory requirements, and if the court's ruling holds up, NHTSA will have to do a broader cost-benefit analysis that accounts for a wide range of factors.