For the first time, the federal government is claiming that greenhouse gases are dangerous for the public health.
This clears the way for the Environmental Protection Agency to regulate carbon dioxide, which is produced by cars, power plants and factories.
However, some say this could cost the country even more jobs in an already troubled economy.
"The Clean Air Act sets out a simple premise, which is, once you know you have pollution and once you know it's endangering human health and welfare, then EPA must act," said Lisa Jackson, an EPA administrator.
The EPA ruled six greenhouse gases constitute toxic air pollution and are therefore subject to regulation under the Clean Air Act.
EPA Has Power to Act, Even if Congress Doesn't
A two-year-old Supreme Court ruling gives the EPA power to set new carbon emissions standards for power plants, factories, and cars -- even if Congress fails to act.
"What it says to the rest of the world is that, although Congress has not succeeded in passing the big piece of climate legislation, nevertheless the United States is prepared to move forward in dealing with carbon dioxide," explained David Bookbinder, senior attorney for the Sierra Club.
The agency has pledged to work with Congress and not move ahead on its own. But some Republicans are skeptical and so are industry group leaders. They fear EPA action could hurt America's struggling economy and send jobs overseas, where environmental regulations may be more relaxed.
"I've heard from every industry sector," said the National Association of Manufacturers' Keith McCoy. "I've heard from utilities. I've heard from large manufacturers. I've heard from small manufactures. There is a significant concern from every single manufacturing sector out there.
Coal-fired power plants are among those with the most at stake. It's added cost they will pass on to consumers.
"I make the energy today for about four cents a kilowatt hour," explained Michael Morris, chairman of American Electric Power. "This will take it up somewhere just south of eight cents a kilowatt hour.
This news comes as President Obama prepares to head to Copenhagen, Denmark for the United Nations Climate Change Summit. He is set to propose the U.S. cut its greenhouse gas emissions 83 percent by 2050.