On Tuesday, the US Supreme Court handed the Environmental Protection Agency a victory in its efforts to control pollutants that are generally emitted as part of generating electricity with coal. The decision, reached by a 6-2 decision, clears the way for the EPA to set rules limiting pollution that crosses state borders.

The regulations at issue are a product of the Clean Air Act's "Good Neighbor" provision. This was enacted in recognition of the fact that a state might have levels of a pollutant that's considered unsafe, but generate little to none of that pollutant within its borders—instead, it drifts into the state with the wind. The Clean Air Act requires the EPA to compel states that generate these pollutants to clean up their acts.

It's rather complicated to identify the source of these pollutants, which may come from several source states, and then determine the reductions necessary in each of those states to bring the receiving area into conformance with the Clean Air Act. And the Act itself doesn't specify the process by which the EPA should do so; the relevant portion of the statute simply states that the EPA can regulate sources of pollution that “contribute significantly" to any state's non-compliance.

The Agency's first attempt at doing so was shot down by the US Court of Appeals for the District of Columbia Circuit in 2005. In response, the EPA devised the following plan: it would identify the sources of pollution, then calculate which of those could be reduced or eliminated at the lowest cost with existing technology. This would determine the amount of reduction required in each state. The states would then be responsible for adopting regulations that brought its emissions in line with the EPA requirements.

The reason for this is that emissions controls start out cheap for relatively inefficient processes, but expenses grow as you attempt to remove more and more of the pollutant. The EPA's formula would target the lowest-hanging fruit at the least expense, regardless of a state's total emissions. In other words, if a state had relatively low total emissions but had not adopted any pollution controls, it would still be made to act before a heavily industrialized one that already had anti-pollution regulations in place.

As reasonable as this may sound, a number of 28 states that would be affected by it joined with organizations that represent industry to sue the EPA. In 2012, the D.C. Circuit Court once again found against the EPA, ordering the Agency to disregard economics and regulate states simply in proportion to their contributions to pollution. In addition, it voided the initial federal emissions control plans for the states, determining that the EPA had not provided the states enough guidance to formulate their own plans first.

The Supreme Court rejected both points. The latter point was dispatched fairly simply. The Clean Air Act specifies an upper limit on the amount of time the EPA is given to act, but it doesn't specify a lower limit. Therefore, the EPA's immediate replacement of state plans with one of its own is in keeping with the language of the statute.

The majority also determined that the EPA's plan, which takes economics into account, is perfectly acceptable. The Clean Air Act simply doesn't state how pollution reductions should be apportioned, leaving the courts to determine if its chosen plan is reasonable. The Supreme Court has now held that it is.

Justice Scalia, joined by Justice Thomas, issued a biting dissent, actually saying of one legal question "Wow, that’s a hard one—almost the equivalent of asking who is buried in Grant’s Tomb." In his view, the Court determined that the answer wasn't Grant.

Although the case was remanded to the D.C. Circuit for further consideration, the decision is a strong endorsement of the Obama EPA's approach to regulating pollution. It also indicates that the externalized costs associated with burning coal—many of them the health costs driven by pollution—are likely to start being priced into the cost of burning it. If the EPA's attempts to regulate carbon dioxide emissions from coal plants fare equally well in the courts, we're likely to see an acceleration of the trend away from coal, which had previously been driven largely by the economics of natural gas and wind.

The Supreme Court's decision is available as a PDF.