February 19, 2026
Federal deregulation is often described as a win for business: fewer rules, lower compliance costs and more operational flexibility. But major policy shifts rarely eliminate risk; they reshape it. The real impact is more nuanced.
A case in point is the Feb. 12 Environmental Protection Agency (EPA) rule that eliminates the 2009 Greenhouse Gas (GHG) Endangerment Finding and repeals all federal GHG emission standards for motor vehicles and engines for model years 2012–2027 and beyond. It also removes associated compliance programs and off-cycle credits. The Administration estimates more than $1.3 trillion in regulatory savings and emphasizes lower vehicle costs and greater consumer choice. For organizations with a global footprint, however, deregulation simply reallocates risk.
Regulatory Asymmetry: Different Rules in Different Places
Rescinding the Endangerment Finding significantly reduces federal climate authority under the Clean Air Act. In the near term, companies operating primarily in the U.S. may experience reduced federal compliance obligations related to vehicle emission standards, but that relief is limited for multinational enterprises. While the U.S. is stepping back from certain climate rules, other jurisdictions continue to move in the opposite direction by tightening emissions targets, expanding carbon pricing and increasing reporting requirements.
This creates regulatory divergence. Companies must decide whether to align with the lighter U.S. standard or continue designing products and operations to meet stricter international rules. In practice, many global businesses choose the higher standard to avoid running multiple systems and to maintain access to key markets. Deregulation in one country does not eliminate obligations elsewhere.
State-Level Action: A Patchwork Risk
When federal standards are removed, states often step in. Climate-forward states may pursue their own emissions requirements under state law, which can create a patchwork of rules across jurisdictions. California’s SB 253 Climate Corporate Data Accountability Act and the similar New York Senate bill 9072A requiring corporations to disclose greenhouse gas emissions are a case in point. For companies operating in multiple states, compliance can become more complicated — and potentially more expensive — than under a single, federal framework.
There is also the risk of legal conflict between state and federal authorities. These disputes can take years to resolve, leaving companies to plan and invest without clarity on which standards will ultimately apply. Large customers based in climate-focused states may also continue to expect suppliers to meet higher standards, regardless of federal changes. Market expectations can function as de facto regulators. The mid-term Congressional elections are another variable that could impact state-level regulation in the coming years.
Litigation: Another Source of Uncertainty
Regulatory reversals of this scale often face legal challenges. In fact, a coalition of environmental and health organizations has already filed suit over EPA’s Endangerment Finding. Court cases can take years, and outcomes are not guaranteed. If courts overturn or modify the rule, compliance obligations could return — potentially on compressed timelines. Companies that halted compliance investments may find themselves scrambling to catch up. Litigation also creates uncertainty around enforcement and disclosure. Public companies must carefully describe regulatory risks in securities filings. Overstating relief or understating uncertainty can create its own exposure.
For capital-intensive industries, decisions to defer compliance investments should be stress-tested against scenarios in which requirements return under compressed timelines. Litigation risk doesn’t stop at challenges to the rule itself. When regulations are scaled back, plaintiffs and state attorney generals may turn to other liability theories to bring claims. In other words, pulling back regulation can shift disputes to different courts — it doesn’t necessarily make them disappear.
From Reaction to Anticipation
When regulations shift, resilience depends on disciplined foresight. Scenario planning should be part of cross-functional risk management structures. Companies should model different outcomes, including continued deregulation, court reversals or expanded state action, so capital investments and product strategies remain sound under multiple scenarios.
Cross-functional integration is critical. Insights from regulatory developments should inform sales forecasts, supply chain decisions, investor messaging and public narratives. Finally, communication matters. Clear and balanced messaging with stakeholders protects credibility. Overstating the benefits of deregulation or ignoring the risk of future shifts can create reputational exposure if the landscape changes again.
The Bottom Line
The EPA’s latest action represents a meaningful shift in federal climate policy. While deregulation may reduce near-term compliance costs for domestic operators, it does not decrease complexity for globally integrated corporations. It shifts the complexity to states, courts and global markets. Organizations that anticipate those shifts, rather than react to them, will be better positioned to navigate what comes next.
If you are looking for a partner that can help you see around the corner with horizon scanning, prioritize risk, inform strategy through scenario planning and build cross-functional risk management structures, contact me.
