A federal appeals court has upheld the Biden administration’s plans for updating the official “social cost of greenhouse gases,” more generally known as the “social cost of carbon,” (SCC) rejecting for the second time a challenge led by Louisiana and joined by several Republican states.
The states attacked a January 2021 Biden executive order (EO 13990) establishing an interagency working group to examine, and ultimately undo, drastic changes the Trump administration made to lower the cost of carbon guidance to federal agencies, downplaying the significance of global warming.
A unanimous three-judge panel of the Fifth Circuit Court of Appeals in New Orleans ruled that Louisiana and the supporting states had no standing to bring their suit. The Holland and Knight law firm explained that “the alleged injuries to the states from potential environmental regulations based on the social cost of greenhouse gas emissions was too speculative, not current injuries or damages. The Fifth Circuit ruled that the states’ claims of harm ‘rely on a chain of hypotheticals: federal agencies may (or may not) premise their actions on the [estimates of the social costs of greenhouse gas emissions established by the Biden Administration] in a manner that may (or may not) burden the states.’”
The law firm added, “Guidance from Biden’s Interagency Working Group was expected in 2022 but has been delayed, and the administration has yet to provide guidance on when the new social costs of greenhouse gas emissions will be released for public comment.”
Writing in Reason magazine, legal analyst Jonathan H. Adler commented, “This is not a surprise. While a district court had initially enjoined the Biden Administration’s use of these estimates (in a tortured legal opinion), this decision was stayed by a different Fifth Circuit panel last year (and the Supreme Court refused to intervene after Louisiana failed to get a single vote for en banc review). A similar challenge was also rejected on standing grounds by the U.S. Court of Appeals for the Eighth Circuit.”
In a related development, attorneys general from 22 Republican states wrote the Energy Department challenging proposed energy efficiency standards for gas stoves. The Cozen O’Connor law firm noted that the AGs that proposed standards are flawed because they rely on an Interagency Working Group’s (IWG) estimates regarding the social costs of greenhouse gases that the AGs allege are value-laden rather than based on quantifiable data. The AGs also allege that the DOE did not fully consider federalism implications and constitutional issues under the Commerce Clause as required before promulgating a final standard.
The Washington environmental think tank Resources for the Future defines the SCC as “an estimate, in dollars, of the economic damages that would result from emitting one additional ton of greenhouse gases into the atmosphere. The SCC puts the effects of climate change into economic terms to help policymakers and other decisionmakers understand the economic impacts of decisions that would increase or decrease emissions.”
There is no definitive SCC, as it is defined by several assumptions, including the discount rate over time. RFF explains, “Future costs and benefits are generally considered less significant than present costs and benefits, and the discount rate reflects this level of relative significance. A high discount rate means that future effects are considered much less significant than present effects, whereas a low discount rate means that they are closer to equally significant.”
The social cost of carbon has been a contentious issue going back several federal administrations. Initially, each agency with skin in the greenhouse game developed its own SCC calculation, based on its own unique assumptions. The Obama administration convened an interagency working group to create a “harmonized,” government-wide SCC. In 2017, the new Trump administration issued an executive order (13783) abolishing the Obama working group and ending the requirement for a unified calculation. The effect was to downgrade the value of reducing greenhouse gases.
A March Brookings Institution paper noted, “The Obama administration initially estimated the social cost of carbon at $43 a ton globally, while the Trump administration only considered the effects of carbon emissions within the United States, estimating the number to be between $3 and $5 per ton. As it stands, the official estimate from the Biden administration is $51, but in November 2022, the EPA proposed a nearly fourfold increase to $190. (The EPA is weighing public comments on that proposal.)”
What happens next. As Adler, a law professor at the Case Western Reserve University School of Law, notes in his Reason article, SCC is likely to get serious judicial review only when actual federal implementation occurs and possibly creates standing. He writes, “If states (or others) are to challenge the Biden Administration’s Social Cost of Carbon estimates, they will have to challenge a discrete agency action that relied upon these estimates. They cannot challenge the estimates independently of an actual agency action that affects them.”
–Kennedy Maize
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