WASHINGTON -- A federal appeals court yesterday threw out a major component of the Bush administration's effort to reduce unhealthy levels of soot and smog in Eastern and Midwestern states, a decision that environmental groups worry will delay action on air pollution well into the next administration.

A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously that the Environmental Protection Agency had overstepped its authority in instituting a rule that would have established a cap-and-trade system for soot and smog.

The court ruling came on the same day that the administration said it would take no steps under the Clean Air Act to regulate greenhouse gas emissions that contribute to global warming, even though the EPA formally announced that it would seek public comment on the issue. The Clean Air Interstate Rule, or CAIR, rejected by the appeals court does not apply to greenhouse gases such as carbon dioxide, which is produced by burning fossil fuels.

The interstate rule represented the Bush administration's most aggressive action to clean the air over the next two decades. The EPA estimated that the rule would help prevent 17,000 premature deaths and reduce levels of sulfur dioxide and nitrogen oxides by as much as 70 percent by 2025. An unusual alliance of power companies and environmental groups supported the measure.

But the three-judge panel found that the EPA had committed "more than several fatal flaws" in creating the measure, which was challenged by several power companies and North Carolina for contrasting reasons.

"No amount of tinkering with the rule or revising of the explanations will transform CAIR, as written, into an acceptable rule," according to the unanimous 60-page opinion issued by the D.C. circuit's Chief Judge David B. Sentelle, and Judges Judith W. Rogers and Janice Rogers Brown.

EPA Administrator Stephen L. Johnson said in a conference call with reporters: "We are extremely disappointed in the court's decision because it's overturning one of the most protective [air pollution] rules in our nation's history. ... We'll wait and see what our next steps are."

Environmental groups said the decision will delay efforts to reduce harmful air pollution and leave tough decisions to be made by the next president and Congress. "This is probably the biggest air-quality setback ever suffered by the EPA under any administration," said John Walke, clean air director and senior attorney for the National Resources Defense Council, an advocacy group.

Lawmakers who support tougher air pollution standards said the decision should help their efforts to pass legislation addressing the problem.

The interstate rule was one of the Bush administration's signature air-pollution policies. It would have required 28 states and the District of Columbia to make reductions in emissions of nitrogen oxides and sulfur dioxide from power plants.

It took a regional approach to the issue and established a cap-and-trade system that would have allowed utilities to sell and buy pollution credits as long as total industry emissions remained below a pre-set cap.

While several environmental groups criticized the rule for not setting more aggressive pollution limits, they nevertheless welcomed the measure, saying they thought it was the best they could expect from the Bush administration.

Many power companies also supported the rule because it was not as costly as some proposals pending in Congress. Even North Carolina-based Duke Energy, which was one of the power companies that challenged the rule, said in a statement that it did not intend to have it overturned.

William M. Bumpers, an attorney with Baker Botts LLP, said most of the 20 or more electric-generating companies that his firm represents supported the rule. Some have made large investments to upgrade their coal-fired plants, assuming the rule would remain.

"This is a trainwreck for the EPA, and it's a trainwreck for the environment," Mr. Bumpers said.

But not all power companies supported the EPA's action. Several, led by Duke Energy Corp. and Florida Power & Light Co., filed court challenges, arguing that the EPA did not have the legal right to establish its plan, and that it had set pollution limits arbitrarily.

North Carolina attacked the plan from a different angle, saying the program was not tough enough, because utilities would be allowed to pollute more by buying credits.

In agreeing with many of those arguments, the judges said the EPA's regional cap system was "fundamentally flawed," because it had not set any state-specific emissions requirements.