Appeals Court Restores Biden Administration’s Climate Metric

The fifth Circuit Court of Appeals on March 16 stayed a district judge’s injunction against the use of the social cost of carbon, or SCC, estimates that federal agencies were directed to incorporate in their environmental analyses of major actions pursuant to an executive order that President Joe Biden issued in January 2021.

Three-judge panel rejected the arguments by Louisiana that the interim SCC metric could cause them a real injury. The court found that petitioners’ claim that the interim estimate will result in increased regulatory burdens “appear untraceable because agencies consider a great number of other factors in determining when, what, and how to regulate or take agency action.” The court noted that the claims are based on a “generalized grievance” of the use of the interim estimates in cost-benefit analyses of regulations and agency action. However, the claimed injury “stems from any forthcoming, speculative, and unknown regulation” that could increase their burden including consideration of social cost of greenhouse gases, rather than from the estimates themselves.

In February, Judge James Cain of the U.S District Court for the Western District of Louisiana issued a preliminary ruling restricting the use of SCC in response to a petition by 10 fossil fuel-heavy states, including Louisiana and West Virginia, which argued that the metric was arbitrarily set and would increase regulatory costs, thereby harming their economies and revenues. Petitioners also argued that the metric does not consider the positive externalities of energy production and fails to justify the use of a global rather than domestic scope in calculating costs.

The panel said that the preliminary injunction halts the President’s directive to agencies in making decisions even before they can make any decisions. Further, the injunction ordered agencies to comply with a prior administration’s internal guidance document that incorporates a particular approach to regulatory analysis, even though the guidance was not mandated by any regulation or statute.

The 2021 executive order reinstated the Interagency Working Group on the Social Cost of Greenhouse Gases, or SC-GHG, following which the Biden administration released interim SCC metrics. Created in 2008, SCC quantifies the long-term economic damage that results from one metric ton increase in carbon dioxide in a year. The previous Trump administration dismantled the IWG and lowered the SCC using a discount rate as high as 7 percent compared to the 3 percent level recommended by the IWG. Currently, the group is in the process of making a decision on the metric, but as it stands, Biden implemented the interim metric utilized under President Obama, which was $51 per metric ton. Trump’s estimate includes only damages implicated on the U.S., rather than global damages depicted in higher estimates by the Biden administration.

Created in 2008, SCC quantifies the long-term economic damage that results from one metric ton increase in carbon dioxide in a year. Metrics from methane and nitrous oxide were established in 2016 under the Obama administration, facilitating a wider SC-GHG metric, which has been used in regulatory benefit-cost analysis for over a decade. In February 2021, the administration reinstated a 2016 guidance for agencies to consider GHG emissions under the National Environmental Policy Act, including the use of SC-GHG.