Avella – Spring 2023

The Social Cost of Greenhouse Gas Emissions

Camille Avella

In 2021, the largest expert survey to date on the economics of climate change revealed an overwhelming consensus that the costs of inaction are higher than the costs of action, and that immediate, aggressive emissions reductions are economically desirable.[1] The survey revealed that economic damages from climate change are predicted to reach $1.7 trillion per year by 2025, and $30 trillion per year by 2075.[2] The social cost of greenhouse gas emissions (“SC-GHG”) is an estimate of the monetized cost of emitting greenhouse gases into the atmosphere.[3] It measures climate change damages through changes in net agricultural productivity, human health, property damage from increased flood risk, and the value of ecosystem services, among other things.[4] The SC-GHG indicates the value of avoiding future damage by curbing climate change today. Policy makers use it to determine whether the benefits of a particular climate policy justify its costs.[5]

SC-GHG Background

The federal government has been required to consider the costs of emissions in its economic analysis since 2008.[6] In the initial implementation of the SC-GHG estimates, they were developed and applied separately by each government agency and department.[7] In 2010, the United States Office of Management and Budget (“OMB”) of the Obama Administration, convened the “Interagency Working Group on the Social Cost of Greenhouse Gases” (“IWG”).[8]  The IWG is a group, comprised of representatives from several federal agencies, tasked with using the best available science and to quantify SC-GHG estimates that could be applied consistently across all federal agencies.[9] They used “a methodology that synthesizes three independent models (one yielding a Nobel Prize) that were the most widely accepted, peer-reviewed frameworks for translating emissions into climate impacts.”[10] In 2016, the IWG released cost estimates of $42 per ton of carbon dioxide.[11] Soon after taking office in 2017, President Trump disbanded the IWG, and his administration came out with new estimates as low as $1 per ton by calculating only damages occurring within the United States and lowering the weight of impacts that will occur in the future through higher discount rates.[12]

In January 2021, President Biden issued Executive Order 13990 (“E.O. 13990”), which reconvened the IWG to provide updated SC-GHG estimates.[13] In the meantime, they published interim estimates of $51 per ton of carbon dioxide.[14] E.O. 13990 directed federal agencies to use the interim estimates “when monetizing the value of changes in greenhouse gas emissions resulting from regulations and other relevant agency actions.” OMB issued guidance on applying these estimates, stating that agencies who use them must respond to any significant comments and ensure its cost-benefit analysis is not arbitrary or capricious.[15]

States’ Challenge to SC-GHG

A. Eighth Circuit Challenge

The State of Missouri, and twelve other states sued the Biden Administration, challenging the Interim Estimates.[16] The states argued that the IWG’s interim estimates were “not a valid exercise of executive power” and that the states were illegally denied the opportunity to comment on them.[17] The district court dismissed the complaint for lack of jurisdiction.[18] They held that the states “lack[ed] standing and their claims [were] not ripe for adjudication.”[19]

A unanimous panel for the Eighth Circuit affirmed the district court decision, holding that the States’ grievance was too “generalized” and that it “fails to meet the standards of Article III standing.”’[20] They noted that the interim estimates do not impose obligations on the states and the “injury that Plaintiffs fear is from hypothetical future regulation.”[21] The panel explained that this “highly attenuated theory of injury … failed to establish that any injury was ‘certainly impending’ or ‘fairly traceable to the challenged action of the defendant[s].”’[22] Additionally, the panel held that the plaintiffs lacked standing because the alleged harm was not tethered to a “specific harm” caused by “a specific agency action.”[23] In addition, the court held that the IWG was not an agency subject to the APA’s notice-and-comment requirements.[24] The states petitioned the Eight Circuit Court of Appeals for rehearing en banc, and the Eighth Circuit Court of Appeals denied their petition, finding, once again, that the states did not allege an injury that was “fairly traceable” to the estimates.[25]

B. 5th Circuit Challenge

Louisiana and nine other states also challenged the interim estimates in the Western District of Louisiana, seeking to prevent federal agencies from using them in regulatory decision making.[26] The district court preliminarily enjoined various federal agencies and officials from using the interim estimates or implementing Section 5 of E.O. 13990.[27] A panel of the Fifth Circuit stayed the preliminary injunction, finding that the states lack standing to pursue their “generalized grievance.”[28] The court observed that if any increased regulatory burdens came to pass in the future, there would be “no obstacle to prevent the Plaintiff States from challenging a specific agency” action in the normal course.[29] The Fifth Circuit denied rehearing en banc and the Supreme Court declined to vacate the stay, with no dissent noted on either occasion.[30]

C. Potential Future Litigation

For now, Federal agencies are permitted to use the interim estimates, but future litigation could change that. A court ordered halt to reliance on the interim estimates would prevent the implementation of a standardized approach to assessing SC-GHG estimates and frustrate agencies’ ability to “rely upon the most robust and up-to-date scientific methodology available.”[31]

Camille Avella is a Junior Editor with MJEAL. Camille can be reached at cavella@umich.edu.

[1] Peter Howard & Derek Sylvan, Gauging Economic Consensus on Climate Change ii-iii (Institute for Policy Integrity, 2021).

[2] Id.

[3] Exec. Order No. 13990 , 3 C.F.R. § 5 (2021).

[4] Id.

[5] Social Cost of Carbon 101, (Available at: https://www.rff.org/publications/explainers/social-cost-carbon-101) (last visited Feb. 28, 2023).

[6] Ctr. for Biological Diversity v. Nat’l Highway Traffic Safety Admin, 508 F.3d 508 (9th Cir. 2007).

[7] See supra note 5.

[8] Response to Petition for Rehearing En Banc at 3, Missouri v. Biden, 52 F.4th 362 (2022) (No. 21-3013).

[9] The IWG has representatives from the Council of Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, Department of Energy, Department of Health and Human Services, Department of the Interior, Department of Transportation, Department of the Treasury, Environmental Protection Agency, National Climate Advisor, National Economic Council, Office of Management and Budget, and Office of Science and Technology Policy. Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates under Executive Order 13990, (Feb. 2021) (Available at: https://www.whitehouse.gov/wp-content/uploads/2021/02/TechnicalSupportDocument_SocialCostofCarbonMethaneNitrousOxide.pdf).

[10] See supra note 8.

[11] Stephen Lee & Ellen Gilmer, Key to Biden Climate Agenda: The Social Cost of Carbon Explained, Bloomberg Law (Bloomberg Law, 2021) (Available at https://www.bloomberglaw.com/bloomberglawnews/environment-and-energy/BNA%200000017720efd7f7ab77e5ffd9a10001?bna_news_filter=environment-and-energy).

[12] See supra note 10; See supra note 5.

[13] See supra note 3.

[14] This figure is identical to the 2016 estimates adjusted for inflation. See supra note 5.

[15] See supra note 8 at 4-5.

[16] Missouri v. Biden, 558 F. Supp. 3d 754, 758 (E.D. Mo. 2021)

[17] Id.

[18] Id. at 772.

[19] Id. at 759.

[20] Missouri v. Biden, 52 F.4th 362, 371 (8th Cir. 2022).

[21] Id. at 371.

[22] Id. at 369.

[23] Id. at 366.

[24] Id. at 370-371.

[25] Missouri v. Biden, No. 21-3013 (8th Cir. Jan. 27, 2023).

[26] Louisiana v. Biden, No. 2:21-CV-01074 (W.D. La. Apr. 22, 2021).

[27] Id.

[28] Louisiana v. Biden, No. 22-30087 (5th Cir. Mar. 16, 2022).

[29] Id. at 7.

[30] Louisiana v. Biden, No. 22-30087 (5th Cir. Apr. 14, 2022); Louisiana v. Biden, No. 21A658 (5th Cir. May 26, 2022).

[31] Defendants’ Combined Memorandum of Law in Support of Motion to Dismiss at 53, Missouri v. Biden, No. 4:21-cv-00287 (E.D. Mo. Jun. 4, 2021).

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