EHS Administration, Regulatory Developments, Sustainability

SCOTUS Refuses to Reinstate Order Blocking Use of Social Cost of Greenhouse Gases

The U.S. Supreme Court (SCOTUS) declined to reinstate an order blocking the Biden administration from utilizing the social cost of greenhouse gas emissions (SC GHGs) as a key climate metric in Louisiana v. Biden on May 26, 2022.

In February 2021, the U.S. Interagency Working Group (IWG) on the SC GHGs issued “Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order (EO) 13990.”

The requirement for federal agencies to consider the social cost of carbon (SCC) dates back to 2008.

“Federal agencies began regularly incorporating [SCC] estimates in benefit-cost analyses conducted under Executive Order (EO) 128661 in 2008, following a court ruling in which an agency was ordered to consider the value of reducing CO2 emissions in a rulemaking process,” the Technical Support Document says.

In 2021, when the interim estimates were released, the SC GHGs for carbon dioxide (CO2) were set at $51 per metric ton.

Louisiana and Missouri (joined by other states) challenged the federal government, seeking injunctions in federal court in their respective states to prevent federal agencies from relying on the interim estimates for any purposes.

“[Louisiana] alleged that the estimates were issued without the notice-and-comment rulemaking procedures generally required by the Administrative Procedure Act (APA) when an agency issues a rule with legally binding effect; that the estimates are arbitrary and capricious; and that, by considering global costs of greenhouse gas emissions, the estimates violate laws that the states claim limit agencies to considering domestic effects of their actions,” says Public Citizen. “The federal government argued that the states lack standing; that their claims are not ripe and may only be raised in the context of a challenge to an agency action that is actually based on some challenged aspect of the estimates; that the issuance of the estimates does not constitute ‘final agency action’ that is reviewable under the APA; and that the states’ legal challenges lack merit. Nonetheless, a district court issued an extraordinarily broad preliminary injunction prohibiting agencies from using the working groups’ SCC estimates in any way and prohibiting the Working Group from continuing its work as directed by the President.

“The federal government appealed to the Fifth Circuit and obtained a stay of the district court’s preliminary injunction,” Public Citizen continues. “In the merits briefing, the federal government focused on its standing, ripeness, and final agency action arguments, as well as challenges to the scope of the injunction; it also argued that the states’ substantive challenges to the SCC estimates were not likely to succeed on the merits.”

The Missouri case was heard in the U.S. District Court for the Eastern District of Missouri, which found that the states lacked standing under Article III, which requires a plaintiff to show “an injury in fact, a causal relationship between the injury and the challenged conduct, and that a favorable decision will likely redress the injury.” In this case, the court also found that the states’ claims were not ripe.

“Ripeness is a justiciability doctrine designed to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties,” states the court’s findings. “For all of these reasons, the Court will grant Defendants’ motion to dismiss for lack of subject matter jurisdiction. Doing so properly responds to the separation-of-powers concerns raised by Plaintiffs by respecting the limits of judicial power.”

The Missouri case has been appealed to the 8th Circuit, while the Louisiana case was appealed to the 5th Circuit, which granted the temporary stay on the lower court’s injunction, while the federal government’s appeal is pending. The states involved in the Louisiana case applied to SCOTUS to vacate that stay.

Now that SCOTUS has refused, it means “federal agencies, including the [EPA], [can] continue using the SC-GHG to set or evaluate policies that affect GHG emissions at least while the case continues,” Sidley Austin LLP says in a Lexology article.

The pros and cons of SC GHGs

SC GHGs put a price tag on the emissions of 1 metric ton of specific GHG emissions types.

“In many ways, it’s the ‘holy grail’ of climate economics, Gernot Wagner, a climate economist at New York University, tells CNBC Make It in an email,” reports CNBC. “How much does each ton of CO2 emitted today cost us — and, thus, how much should each ton of CO2 cost for all of us to be making the right decisions?”

The IWG set the following cost estimates per metric ton:

  • Carbon: $51
  • Methane: $1,500
  • Nitrous oxide: $18,000

Both methane and nitrous have higher price tags because they cause more environmental and health damage, meaning more economic damages, both now and in the future.

And the cost estimates change depending on who occupies the White House. The Trump administration disbanded the IWG and came up with its own interim estimates, which were “seven times lower than the IWG’s estimate – between $1 to $7 per ton,” says Susanne Brooks, senior director of U.S. climate policy and analysis for the Environmental Defense Fund, according to CNBC.

“Supporters of the measure argue it [gives] policy makers a way to make decisions by being able to account for the cost of a legislative action on the environment,” CNBC notes. “Detractors say, however, that the measure’s flaws render it an inefficient policymaking tool.”

“The fact that simple and very reasonable changes to the inputs of the models produce significantly different results demonstrates why they’re not credible tools for regulatory rulemaking,” said Nick Loris, an economist who focuses on energy, environmental, and regulatory issues at the Heritage Foundation, according to CNBC.

“The higher figure would carry greater weight in terms of whether a project moves forward or not as part of the environmental review and permitting process,” Loris continues. “By boosting the climate cost of projects, regulator(s) could use the social cost of carbon to derail everything from energy to infrastructure projects. Agencies can also use the higher value to justify new regulations on everything from power plants to appliances in your house.”