The decision overturns a NHTSA regulation that would have raised the fuel economy standard for so-called light trucks — pickup trucks, SUVs and minivans — to 23.5 miles per gallon (mpg), from 22.2 mpg, by 2010. The standard for other passenger cars is 27.5 mpg.

Petitioners argued the NHTSA rule was too weak in light of evidence that increased fuel economy can lead to a reduction in the greenhouse gas emissions responsible for climate change. David Doniger, Policy Director of the Climate Center at the Natural Resources Defense Council (NRDC) and an attorney on the case, said in a statement, "This is another court rebuke to the Bush administration's policy of ignoring global warming."

The court invalidated NHTSA's revision of the standard for light trucks largely because it found NHTSA did not adequately account for the adverse effects of greenhouse gas emissions from tailpipes.

In preparing a cost-benefit analysis for the rule, NHTSA did not evaluate the benefits of reduced greenhouse gas emissions associated with increased fuel economy. The court opinion states, "[NHTSA] cannot put a thumb on the scale by undervaluing the benefits and overvaluing the costs of more stringent standards. NHTSA fails to include in its analysis the benefit of carbon emissions reduction in either quantitative or qualitative form. It did, however, include an analysis of the employment and sales impacts of more stringent standards on manufacturers."

Because the benefits calculation was underestimated, the basis on which NHTSA made its decision was not accurate. Subsequently, the court found the rule to be "arbitrary and capricious" under the Administrative Procedure Act, which requires agencies to make decisions based on reasonable rationale and factual assertions.

By not accounting for a reduction in greenhouse gas emissions, NHTSA also violated the National Environmental Policy Act (NEPA), the court found. NEPA requires agencies to assess the "cumulative impact" of a rule on the environment in either an environmental assessment (EA) or a more detailed environmental impact statement (EIS).

For the revision to the light truck standard, NHTSA chose to prepare the less detailed EA, claiming the rule would have no significant impact on the environment. "We conclude that the EA's cumulative impacts analysis is inadequate. While the EA quantifies the expected amount of CO2 emitted from light trucks [model years] 2005-2011, it does not evaluate the 'incremental impact' that these emissions will have on climate change or on the environment more generally," the court opinion states. The court also instructed NHTSA to prepare the detailed EIS when revising the rule.

The court also found fault with NHTSA's definition of "light truck." By law, vehicles designed to hold no more than ten passengers and not intended for heavy work or off-road use are to be considered "passenger vehicles." However, NHTSA has excluded SUVs and minivans from the passenger vehicle category and placed them in the light truck category, a decision critics call the "SUV loophole." The court found NHTSA did not adequately provide rationale for excluding SUVs and minivans from the passenger vehicle category. NHTSA will now have to reevaluate its existing policy.

The ruling is a rebuke to the Bush administration's fuel economy policy but also to the work of senior White House officials, including Vice President Richard Cheney. A recent Public Citizen investigation found the NHTSA revision to the light-truck standard was the product of an intense campaign by the vice president's office to weaken the proposal. According to Public Citizen, "Records show that NHTSA played a subservient role to White House and vice presidential higher-ups. Some meetings appear to have excluded NHTSA staff altogether."

President Bush has also used the NHTSA standard as a sign of his commitment to energy conservation and environmentalism. In his 2007 State of the Union address, Bush said, "We need to reform and modernize fuel economy standards for cars the way we did for light trucks."

The court instructed NHTSA "to promulgate new standards consistent with this opinion as expeditiously as possible and for the earliest model year practicable." The Bush administration has yet to give word on whether it will appeal the decision.