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Deal lawyers react to EPA decision

Alan Neuhauser
Jun 30, 2022
A photograph of the Supreme Court building and an American flag flying in front of it.
Photo: Alex Wong, via Getty Images

The Supreme Court on Thursday limited the EPA's authority to regulate greenhouse gas emissions from power plants.

Why it matters: While the decision — in West Virginia v. the Environmental Protection Agency — hamstrings the federal government's efforts to address climate change, M&A attorneys in climate tech tell Axios that the potential impact on investing is less clear.

What they're saying: Call it the "we'll show you" effect. Backlash to the ruling could spur companies and investors to put more money into renewables.

  • "There's reputational pressure: companies feeling they've got to do something," Seth Jaffe, a partner in the environment practice group at Foley Hoag, tells Axios.
  • Mona Dajani, global head of renewable energy at Pillsbury, says, "People vote with their feet and their money — and there's going to be a lot of pushback. A lot of utilities are already taking action toward net-zero."
  • Also expect responses from state leaders — namely potential new incentives for renewables deployment: "All those things are going to incent those different pieces of the market and create potential additional deal flow," Jaffe says.

What we're watching: "Blocking federal emissions rules may give older coal and inefficient gas power plants a lifeline," Allan Marks, a partner at Milbank, tells Axios.

  • "There are other reasons why coal plants may be disfavored — investor sentiment, state climate regulations, low-cost natural gas compared to coal, and falling costs (and tax incentives) for solar and wind energy," Marks continues. But "investors may reconsider their current reluctance to invest in new thermal power generating capacity and related upstream fossil fuel assets."
  • Meanwhile: "Uncertainty about future regulations could increase the risk of new investments," Marks adds, "driving up costs and creating delays for new projects across the energy sector."

How it won't change anything: "While government action is a necessary component of addressing climate change, the private sector has become far and away the biggest driver of renewable energy in the U.S. and increasingly in other markets around the world," Giji John, a partner at Orrick, tells Axios.

  • "There are more potential buyers than there are available projects," John continues. "And even more recently, strategic investors, particularly oil and gas companies and private equity investors, have made larger and larger investments in the renewables space as part of a broader ESG effort. All of that is arguably in spite of, and not owing to, the Clean Power Plan or any other government mandate."
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