Background and Regulatory Framework

Diamond Alternative Energy and other gasoline and liquid fuel producers challenged EPA's approval of California regulations designed to reduce greenhouse gas emissions by mandating automakers manufacture more electric vehicles and fewer gasoline-powered vehicles. Under the Clean Air Act's cooperative federalism structure, EPA sets nationwide emissions standards for new motor vehicles, but California may obtain waivers under Section 209 to impose more stringent standards, which other states may then adopt. California obtained such approval, and several states followed its lead. Five automakers that had invested heavily in electric vehicle production intervened to defend EPA's approval alongside California and the adopting states.

The Standing Question

The D.C. Circuit held that the fuel producers lacked Article III standing to challenge EPA's approval. The Supreme Court granted certiorari to review whether the producers had demonstrated the injury, causation, and redressability elements required for Article III standing.

The Supreme Court's Holdings

Writing for a seven-justice majority, Justice Kavanaugh reversed and remanded. The Court held that monetary costs to producers from decreased fuel purchases constituted an injury in fact for Article III standing purposes. The majority further held that the causation element of Article III standing was satisfied, and that setting aside EPA's approval of California's regulations would likely redress at least some of the producers' monetary injuries.

Significantly, the Court held that to demonstrate standing, producers did not have to introduce affidavits either from expert economists or from directly regulated automakers explaining how they would respond to a court order invalidating California's regulations. This holding rejected the more demanding evidentiary standard that had led to dismissal in the D.C. Circuit.

Chief Justice Roberts and Justices Thomas, Alito, Kagan, Gorsuch, and Barrett joined Justice Kavanaugh's majority opinion. Justice Sotomayor filed a dissenting opinion, as did Justice Jackson.

Implications for Regulatory Challenges

The decision addresses the evidentiary requirements for establishing standing in regulatory challenges where the causal chain runs through the decisions of third-party regulated entities. By holding that producers need not submit expert affidavits or testimony from directly regulated parties, the Court made it easier for upstream and ancillary industry participants to establish standing to challenge regulations that affect them indirectly through market effects.