Greenhouse Gas and Chemical Regulation Shifts as Federal Rollbacks Meet State Action
May 19, 2026Greenhouse gas and chemical regulation is entering an era of sharper federal-state divergence. At the federal level, recent and proposed actions reflect a deregulatory approach to climate and chemical controls, including rescission of the endangerment finding framework for vehicle GHG standards, recalibration of EtO and methane rules, and reconsideration of several major regulatory programs. States, particularly California, are concurrently continuing to pursue more aggressive climate disclosure and mobile source requirements, even as federal authorities and industry challengers push back.
This Insight, the fourth and final based on our Earth Day webinar series, examines federal deregulatory efforts, California’s GHG reporting and climate-related financial risk disclosure programs, mobile source regulation, and litigation shaping the path forward.
FEDERAL CLIMATE REGULATION MOVES TOWARD DEREGULATION
The most significant federal development of late was the US Environmental Protection Agency’s rescission of the endangerment finding. EPA’s 2009 finding that GHG emissions from vehicles endanger public health or welfare—issued after the US Supreme Court held in Massachusetts v. EPA that GHGs are air pollutants under the Clean Air Act (CAA)—became the basis for regulating GHG tailpipe emissions and helped underpin later stationary source and other GHG regulations.
EPA’s rationale for the rescission rested primarily on a revised interpretation of CAA Section 202(a), asserting that “air pollution” refers to local or regional exposure rather than global atmospheric effects. The agency also relied on related legal arguments such as the major questions doctrine, but did not finalize earlier proposed bases tied to climate science, control technology, or cost considerations. For a more detailed discussion, read our LawFlash on the recission.
Litigation is already pending in the DC Court of Appeals, where the central issue is likely to be EPA’s Section 202(a) interpretation and its tension with Massachusetts v. EPA, positioning the case for potential Supreme Court review. For regulated parties, the immediate effect is clear: federal vehicle GHG standards no longer apply. The broader implications are more limited in the near term as EPA did not revise underlying climate science findings that support other GHG regulations.
ETHYLENE OXIDE, METHANE, TSCA RULES ARE BEING RECALIBRATED
The deregulatory trend is also visible in chemical and industrial emissions programs, though in many cases the shift is better understood as a recalibration rather than a wholesale repeal.
Ethylene Oxide Regulation
For ethylene oxide (EtO), EPA’s prior approach moved toward very stringent National Emission Standards for Hazardous Air Pollutants requirements, driven by updated risk values and dramatically lower acceptable exposure levels.
Those standards contemplated near-zero emissions, advanced controls, and continuous monitoring. The post-2025 approach places greater emphasis on practicality and continuity of sterilization capacity, including reconsideration of emissions limits, extended compliance timelines, and greater coordination with the US Food and Drug Administration.
Methane Regulation
Methane regulation is moving in a similar direction. Prior oil and gas methane rules emphasized frequent leak detection and repair inspections, strict venting and flaring limits, broad new and existing source coverage, and third-party monitoring programs.
The recalibrated approach reduces monitoring burdens, narrows applicability for smaller or marginal wells, softens some third-party monitoring and automatic enforcement mechanisms, and reframes methane in part as an operational efficiency issue.
Toxic Substances Control Act
The TSCA program is also shifting from a precautionary exposure-maximizing model toward a more targeted use-based framework. Earlier implementation emphasized broad conditions of use, conservative exposure assumptions, limited reliance on workplace protections, and frequent findings of unreasonable risk.
Recent and proposed changes reflect a recalibration of that approach, including narrower scoping of risk evaluations, greater reliance on real-world controls, and more tailored restrictions rather than broad bans or phaseouts. For a more detailed discussion on the TSCA framework changes, read our LawFlash.
Additional federal deregulatory actions remain in motion, including reconsideration of the Clean Power Plan 2.0, standards for oil and natural gas operations, and the federal GHG reporting program.
Taken together, these developments reflect a broader federal shift away from expansive, precautionary regulation toward a more targeted, implementation-focused approach. Across programs, EPA is increasingly weighing feasibility, operational realities, and economic impacts alongside environmental and public health objectives, resulting in narrower, more use-specific regulatory frameworks.
CALIFORNIA CONTINUES TO ADVANCE CLIMATE DISCLOSURE REQUIREMENTS
As federal policy shifts, California continues to move forward with climate-related reporting and disclosure programs, reinforcing its role as a leading state regulator in this area.
The state’s current framework centers on two laws: SB 253, which requires GHG emissions reporting, and SB 261, which requires disclosure of climate-related financial risk, both implemented through initial regulations adopted by the California Air Resources Board in February 2026.
At a high level, these requirements apply to large US-based entities that exceed specified revenue thresholds and have a sufficient nexus to California, as defined by existing state tax standards. While SB 253 is moving forward, with initial Scope 1 and Scope 2 emissions reporting due in August 2026 and early flexibility tied to “best-available data” and good-faith compliance, SB 261 is currently paused following a Ninth Circuit injunction, leaving companies in a holding pattern as litigation proceeds and implementation remains uncertain.
California’s approach underscores both the direction and complexity of state-led climate regulation. The state is expanding disclosure obligations even as federal requirements are scaled back but key elements of the framework, such as its enforcement timelines, Scope 3 requirements, and financial risk reporting, remain in flux.
For companies, the immediate focus should be on assessing applicability, building emissions data infrastructure, and preparing for compliance while monitoring ongoing rulemaking and litigation. For a more detailed discussion of CARB’s February 2026 initial regulations and their implementation, see our LawFlash.
MOBILE SOURCE REGULATION REMAINS CONTESTED
California’s mobile source program, Advanced Clean Cars I, remains another major area of federal-state tension. The program has reduced criteria pollutants and GHG emissions from passenger vehicles and required automakers doing business in California to produce increasing numbers of battery electric, hybrid, plug-in hybrid, and fuel cell vehicles.
Advanced Clean Cars II, the follow-up regulatory program, increased stringency and introduced a mandate for 100% of new passenger vehicles to meet zero-emissions standards, including plug-in hybrids, by model year 2035. The Advanced Clean Trucks program requires manufacturers certifying trucks for sale in California to sell increasing percentages of zero-emission trucks between 2024 and 2035.
Because other states may adopt California standards under CCA Section 177 when a waiver has been granted, California’s mobile source rules have consequences beyond the state. Federal pushback has focused on the Congressional Review Act disapproval of EPA’s waiver for Advanced Clean Cars II and Advanced Clean Trucks as well as EPA’s proposal to block California’s heavy-duty vehicle inspection and maintenance requirements for out-of-state vehicles.
Litigation adds another layer of uncertainty. State attorneys general are challenging the Congressional Review Act resolutions affecting Advanced Clean Cars II and Advanced Clean Trucks. Litigation over Advanced Clean Cars I also continues after the Supreme Court held that industry groups have standing to challenge the program. The result is a moving regulatory target for manufacturers, fleet operators, and other businesses affected by mobile source requirements.
KEY TAKEAWAYS
- Federal GHG and chemical regulation is recalibrating, with EPA emphasizing narrower legal authority, feasibility, and practical implementation.
- The endangerment finding rescission eliminates federal vehicle GHG standards and may tee up further judicial review of the scope of EPA’s CAA authority.
- EtO, methane, and TSCA developments reflect a broader shift from precautionary or comprehensive regulation toward more targeted, context-specific controls.
- California continues to advance climate disclosure and mobile source programs, even as federal action and litigation create uncertainty around implementation.
- SB 253 GHG emissions reporting is moving forward, with first Scope 1 and Scope 2 reports due August 10, 2026, while SB 261 climate-related financial risk reporting is on hold.
- Companies should monitor both federal rollbacks and state-level requirements, particularly where California rules may affect national operations or supply chains.
What Lies Ahead
The current regulatory environment is defined by divergence. Federal agencies are narrowing or reconsidering major climate and chemical regulatory programs, while California and other states continue to pursue climate disclosure and emissions-reduction strategies. Litigation will play a central role in determining how much of each approach survives.
For companies, the practical challenge is not simply tracking whether regulation is increasing or decreasing. It is understanding which rules apply, where, and on what timeline. Businesses with national operations should prepare for continued uncertainty, especially where state programs, federal preemption arguments, waiver disputes, and constitutional challenges intersect.