(Changes paraphrase to full quote in paragraph 7)

By Valerie Volcovici

WASHINGTON (Reuters) -The Trump administration has billed its plan to undo U.S. climate regulation as a way to cut costs for industry, but it may backfire by forcing automakers, utilities, and manufacturers into a future of regulatory uncertainty and litigation risk, according to lawyers and trade groups.

Republican President Donald Trump's administration announced on Tuesday a plan to rescind the long-standing finding that greenhouse gas emissions endanger human health, removing the legal foundation for U.S. greenhouse gas regulations.

Environmental Protection Agency Administrator Lee Zeldin said the move, which would end limits on greenhouse gas pollution from vehicle tailpipes, power plants, smokestacks and other sources, would save companies $52 billion in environmental compliance costs.

But companies that have already invested heavily in reducing emissions to meet government limits, a move also demanded by many shareholders, are worried the proposal will lead into the regulatory and judicial unknown, lawyers said.

"Industries that have GHG standards set by EPA have long been complying with them and don't want them to be stripped away," said Meghan Greenfield, partner with law firm Jenner & Block and former EPA counsel, who represents auto sector clients. "The stability of the regulatory regime is extremely important for industry as a baseline."

Repealing the endangerment finding would raise questions about state authorities to file lawsuits seeking damages for harms caused by companies' past greenhouse gas emissions or to pass statutes going after those companies for damages, said Zach Pilchen, senior counsel at Holland & Knight.

"Taking out the endangerment could have ramifications not just for federal regulations but questions of state authorities in areas that were previously considered precluded by these federal regulations," he said. "In that sense, it could inject a lot more uncertainty for companies."

"I think what the administration has missed is that most of industry has already retrofitted for regulations," said Camille Pannu, associate law professor at Columbia University. "Industry did want deregulation, but maybe not through this vehicle."

One former Trump administration source said during Trump's first term, the EPA had declined to take on the endangerment finding because of strong resistance from industry and the legal risk associated with undermining federal authority on the matter.

Three sources in the automaker industry told Reuters privately that the EPA's proposed repeal of vehicle efficiency standards is much broader than anticipated. In addition to tailpipe standards, the proposal would eliminate air conditioning efficiency testing and remove requirements for battery monitoring and battery durability.

Albert Gore, executive director of the Zero Emission Transportation Association, said the EPA action to reverse long-settled law comes as "clean" car sales are growing steadily and powering a U.S. battery and vehicle manufacturing boom.

Over the last decade, manufacturers announced $197.6 billion in investments in U.S. EV and battery manufacturing facilities, according to the Environmental Defense Fund.

"Taking backward steps and adding new regulatory uncertainty harms consumers, unsettles markets, and will complicate ongoing business decisions for auto manufacturers," Gore said.         

LUKEWARM REACTION

Industry groups have been guarded in their reactions to the EPA announcement, mostly saying they will review the proposal and offer comments in coming weeks.

Edison Electric Institute, the electric utility industry's main lobby group, said it supported the EPA establishing clear and consistent regulatory policies to drive infrastructure and investment.    

"It is essential that EPA use its authority to craft flexible regulations that account for impacts to reliability and customer bills," said EEI spokesman Jeremy Ortiz. 

The power industry is responsible for around a quarter of U.S. greenhouse gas emissions and has steadily reduced its carbon output over more than a decade by replacing older coal-fired generators with natural gas, solar and wind.

EEI had sided with the EPA, then part of former President Joe Biden's administration, in a 2022 Supreme Court case in which West Virginia challenged the agency's authority to regulate power plants.

"Voiding that authority could upend that predictability and uniformity and potentially subject individual GHG emitters to the idiosyncratic whims of individual district court judges," it said in its brief at the time.

Auto industry group, the Alliance for Automotive Innovation, welcomed the tailpipe deregulation and said it was digesting the broader proposal to repeal the endangerment finding. The American Petroleum Institute and the American Trucking Associations both cheered the planned repeal of vehicle tailpipe rules.

The U.S. Chamber of Commerce had also previously opposed the repeal because of its destabilizing effect on members.

"While we did not call for this proposal, we are reviewing it and will consult with members so we can provide constructive feedback to the agency," Marty Durbin, president of the Chamber's energy institute, said on Tuesday.