Amid much criticism, the Biden administration recently announced it’s moving forward to address the growing impacts of the climate crisis by accounting for climate change impacts in certain key agency decisions. Analysts predict lengthy court battles ahead.
Biden’s Day One Executive Order (EO) 13990 on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis reestablished an Interagency Working Group (IWG) and tasked it with identifying areas of budgeting, purchasing, and other key decisions where agencies should consider the social cost of greenhouse gases (SC-GHG).
“The metric provides a monetary estimate that represents both the societal costs associated with emitting one additional metric ton of greenhouse gases (GHG) and the societal benefits associated with a one-ton reduction in (GHG) emissions in a given year,” according to The Wake Forest Law Review. EO 13990 “directed the IWG to publish interim and then final estimates of the ‘monetized damages associated with incremental increases in [GHG] emissions,’ specifically the emissions of carbon, nitrous oxide, and methane. The IWG released the interim estimate values for the social cost of carbon, nitrous oxide, and methane in February 2021 but has not yet released finalized values [as of October 10, 2023].”
SC-GHG
There are four major steps in conducting SC-GHG estimations:
- Socioeconomic projections
- Climate modeling
- Translation to economic damages
- Economic discounting
There are a variety of approaches that can be taken in each of these steps to reach these predictions.
The SC-GHG metrics have been hotly protested by many Republican states.
“The Biden administration continues to use unproven figures to attempt to justify its environmental policies that drive up costs for families, hamstring American employers, and delay job-creating infrastructure projects from ever moving forward,” says a statement released by U.S. Senator Shelley Moore Capito, R-W.Va., ranking member of the Environment and Public Works (EPW) Committee, on September 21, 2023. “The problem is the math doesn’t add up, and in fact, doesn’t exist. I’ve asked the administration repeatedly for details, proof points and facts on where its [SC-GHG] numbers come from and how they’re using them, and they’ve chosen to move forward anyway with overreaching, broad directives with no regard for transparency, public input or impacts on millions of Americans.”
Last month, the U.S. Supreme Court (SCOTUS) declined to review a lower court’s decision that rejected state arguments against the SC-GHG metrics because the formulas hadn’t been used in regulatory matters at the time the legal challenges were filed.
On Thursday, November 9, 2023, the White House Office of Information and Regulatory Affairs (OIRA) released final guidance to improve regulatory analysis that alters “how costs and benefits are calculated in a couple of ways, and [references] the [SC-GHG] several times throughout,” Law 360 notes. “The resurgence of [SC-GHGs] proved to be very unpopular with two groups of Republican-led states that sued to prevent their application. The state coalitions lost in Eighth Circuit and Fifth Circuit legal battles against the administration, and [SCOTUS] last month declined to review the cases. The appellate rulings established that the interagency working group's estimates can't be challenged on their own, but rather when they're applied as part of formal rulemaking.”
Last year, due to “recent scientific advances,” the EPA proposed a new approach to estimating the SC-GHG for a sensitivity case in its regulatory analysis. The proposal came packaged as part of a proposed rule to cut methane and other harmful emissions. In this case, the SC-GHG is being applied to methane in the Agency’s benefit-cost analysis.
The proposed use of a new SC-GHG analysis method marked the first time a government agency has suggested a new approach in estimating SC-GHG.
“For EPA’s central analysis of the proposed methane rule, the agency does two things: It applies the interim estimates of the social cost of methane that were established under Executive Order (EO) 13990, which has its foundation in the SCC (Social Cost of Carbon) estimation process that was developed by the original Interagency Working Group (IWG) on the [SC-GHG] in 2010,” according to Resources for the Future. “EPA also includes a new sensitivity analysis that incorporates a comprehensive update to the way the agency estimates the SCC, including for carbon dioxide, methane, and nitrous oxide. This updated estimate allows for EPA to receive public comment on the new methodology, inform potential future modifications to the SCC estimation process, and support the potential usage of the SCC in the final rule.”
As the EPA and other federal agencies use interim SC-GHG estimates in final rules, it will set the stage to legally challenge the use of those estimates.
While some agencies, such as the EPA, have the resources to move ahead with creating their own interim SC-GHG estimates, other agencies must wait for the IWG to publish those estimates. So far, the IWG hasn’t provided an estimated date for doing so.
Legal precedent
Aside from the recent SCOTUS decision in declining to hear the states’ challenge to the use of SC-GHG estimates, there have only been a handful of prior cases challenging the use of SC-GHGs:
- Zero Zone v. U.S. Department of Energy (2016): The 7th Circuit ruled the Department of Energy (DOE) was given authority to use the social use of carbon estimates by the Energy Policy and Conservation Act, which upheld its commercial refrigerator efficiency standards.
- State of California v. David Bernhardt (2020): A federal judge in the Northern District Court of California found the Bureau of Land Management (BLM) inappropriately failed to include GHG emissions costs in global environmental cost estimates in its social cost of methane analysis. This finding led the court to vacate “the Trump administration's rescission of most of the Obama-era rule limiting natural gas methane emissions on federal and Native American lands,” notes Law 360.
- High Country Conservation Advocates, et. al. v. U.S. Forest Service, et. al. (2014): The District Court of Colorado found environmental documents to be in violation of the National Environmental Policy Act (NEPA) due to analysis deficiencies, which included failing to incorporate a GHG emissions cost study into its analysis. This fact resulted in the invalidation of “a large portion of a BLM and U.S. Forest Service plan to open wilderness areas to energy exploration,” Law 360 continues.
“Because the Biden administration has an all-of-government approach to addressing climate change, the next litigation could be in the context of something the USDA is doing, or another agency that you wouldn't even necessarily associate with environmental regulation, that is using social cost of carbon in a way that somebody wants to challenge,” said Douglas Hastings, a partner at Morgan Lewis & Bockius LLP, in Law 360.
SCOTUS’s ruling in West Virginia v. EPA opened the door on using the major questions doctrine in regulatory cases, meaning the historic deference courts provided to federal agencies can no longer be relied on.
It’s important to keep in mind federal agencies have some pretty strong defensive weapons in their arsenals in fighting SC-GHG challenges.
SC-GHG estimates go through extensive review processes that incorporate best-available science, peer review, and public comments before final rules are issued.
“To win an argument that the standard is high, you have to show that it's arbitrary and capricious to use these numbers," said Max Sarinsky, a senior attorney at New York University School of Law's Institute for Policy Integrity, according to Law 360. “So, to say that it's arbitrary and capricious to use Nobel Prize-winning work seems a little difficult to me.”
“And he said that in a lot of rules, agencies don't rely entirely on the estimates, but rather include them in a number of factors that support a rule or decision.”
Although SC-GHG estimates are certain to face extensive legal challenges, industries seeking to challenge these estimates are advised to prepare for long and costly court battles armed with the knowledge that federal agencies will be well prepared to support the numbers used in their rulemaking processes.