EPA says it will decide by next year whether to order utilities to cut emissions of carbon dioxide, a greenhouse gas. The lawsuit targeted the five largest emitters of carbon dioxide in the United States, four private companies and the federal Tennessee Valley Authority.
The Obama administration sided with the power companies in this case.
Justice Ruth Bader Ginsburg, writing for the court, said the Clean Air Act gives the EPA authority to regulate carbon-dioxide emissions from power plants.
The landmark environmental law leaves no room for what Ginsburg described as a parallel track, "control of greenhouse gas emissions by federal judges."
On the other hand, Ginsburg said, that the states and conservation groups can go to federal court under the Clean Air Act if they object to EPA's eventual decision.
The decision reversed a ruling by the 2nd U.S. Circuit Court of Appeals in New York.
Justice Sonia Sotomayor did not take part because she sat on the appeals court panel that heard the case.
The states' lawsuit is the second climate change dispute at the court in four years. In 2007, the court declared that carbon dioxide and other greenhouse gases are air pollutants under the Clean Air Act. By a 5-4 vote, the justices said the EPA has the authority to regulate those emissions from new cars and trucks under that landmark law. The same reasoning applies to power plants.
EPA's consideration of regulating those emissions stems from the earlier court ruling.
The private defendants in the suit are American Electric Power Co. of Ohio, Cinergy Co., now part of Duke Energy Corp. of North Carolina; Southern Co. Inc. of Georgia, and Xcel Energy Inc. of Minnesota.
Eight states initially banded together to sue. They were California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont and Wisconsin. New Jersey and Wisconsin withdrew this year after Republicans replaced Democrats in their governor's offices.
The high court did not rule on some potential state-law claims.
Ginsburg said those are best addressed by lower courts.
The case is American Electric Power Co. v. Connecticut, 10-174.