In a pivotal environmental case with wide reaching implications, the U.S. Supreme Court ruled last Friday that a group of fuel producers have Article III standing to challenge the EPA’s approval of a waiver under the Clean Air Act permitting California regulations (.. adopted in 17 states) requiring automakers to manufacture more electric vehicles and fewer gasoline powered vehicles.

In a 7–2 decision issued on June 20, 2025, in Diamond Alternative Energy, LLC v. EPA, the Court ruled that a group of oil and gas companies have standing to challenge California’s zero emissions vehicle regulations, reviving a lawsuit that had been dismissed by the D.C. Circuit for lack of standing.

Legal commentators and media headline writers alike are describing this as the Supreme Court delivers a final blow to California’s imperiled emission standards. It is actually much more than that, including having an impact from Maryland to Oregon and Vermont to New Mexico, and ..

The Legal Issue: Who Can Sue and Why It Matters

At the heart of the case was whether a group of fuel producers, who (.. make gasoline and ethanol, etc.) are not directly regulated by the California rules (.. that regulate the sale of cars), could sue the U.S. Environmental Protection Agency for approving the state’s greenhouse gas emissions standards under the Clean Air Act.

“The government generally may not target a business or industry through stringent and allegedly unlawful regulation, and then evade the resulting lawsuits by claiming that the targets of its regulation should be locked out of court as unaffected bystanders,” the Supreme Court opinion says.

“We reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion.”

Explaining the challenged California regulations, the Court wrote the “regulations generally require automakers (i) to limit average greenhouse-gas emissions across their fleets of new motor vehicles sold in the State and (ii) to manufacture a certain percentage of electric vehicles as part of their vehicle fleet.”

“To date, acting pursuant to the Clean Air Act, 17 States and the District of Columbia have copied California’s greenhouse-gas emissions standards for new motor vehicles, the electric-vehicle mandate, or both,” the opinion describes.

Fuel producers argued that the EPA and California had exceeded the scope of the 1970s era Clean Air Act, which, despite preempting states from enacting their own limits, allows the heightened standards in California to address smog in California. California’s new emissions standards, adopted in 17 states after being approved for California, “did not target a local California air quality problem, as they say is required by the Clean Air Act, but instead were designed to address global climate change,” Justice Brett M. Kavanaugh wrote, using italics to describe the industry’s position.

The Court’s opinion emphasized that even incremental changes in fuel sales would satisfy the requirement for standing.

A Blow to State Climate Authority

Though the decision does not resolve the underlying case, it clears the way for the lawsuit to move forward, potentially setting the stage for a broader dismantling of California’s regulatory authority over emissions and vehicle standards. This is a critical development because, for decades, California has exercised a unique role under Section 209 of the Clean Air Act, which allows the state to set stricter air quality standards than the federal government, with EPA approval.

Fun fact. California has received more than 100 waivers under the Clean Air Act.

The current challenge aims to roll back that authority. The industry’s argument, supported now by a majority of the Court, is that California’s EV mandates are not truly about local smog or air pollution but are instead an improper attempt to regulate global carbon emissions and climate change through a legacy statute.

A Broader Political Assault on Climate Regulation

The Supreme Court’s decision comes on the heels of political efforts in Washington, D.C. We blogged in advance of President Trump’s signing last week of three Congressional Review Act resolutions disapproving the same Biden administration’s EPA rules that are the subject of this Supreme Court case. At the bill signing ceremony, President Trump declared that “our Constitution does not allow one state special status” to dictate national energy and transportation policy.

The California waiver and all of the state approvals are now in serious jeopardy.

The Dissenting Voices

The majority opinion rejected the argument that “surging consumer demand” for electric vehicles meant that invalidating the regulations would not cause auto makers to make more fossil fuel vehicles. Relying on “commonsense economic principles” and record evidence, the Court reasoned that it was sufficiently “predictable” that invalidating California’s regulations would likely redress the fuel producers’ injury.

Justice Sonia Sotomayor and Justice Ketanji Brown Jackson dissented from the majority.

Justice Jackson, in particular, warned that the Court’s ruling “gives fodder to the unfortunate perception that moneyed interests enjoy an easier road to relief in this Court than ordinary citizens.” She argued that the case was largely moot because of the recent Congressional resolutions and that the Court’s intervention signals a troubling judicial trend favoring powerful industries over environmental protection.

What Comes Next?

With the case now remanded to the lower courts, the legal validity of California’s emissions standards (.. in use in 17 states) will all but certainly be repealed. Many suggest the only question to be resolved is whether states retain any meaningful authority to regulate greenhouse gas emissions from vehicle electrification to building electrification, in the face of federal opposition.

For businesses and environmental lawyers alike, Diamond Alternative Energy is more than a procedural decision about standing. It is a shot across the bow in what is quickly becoming a sweeping redefinition of state and federal roles in climate policy. As legal challenges mount and Congress shifts direction, state climate change initiatives may be headed for a constitutional reckoning.