Regulatory Tracker

The Social Cost of Greenhouse Gases (Carbon Dioxide, Methane, Nitrous Oxide)

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Quick Take

The Biden administration is using the interim social cost of greenhouse gases estimates in rulemakings while the interagency working group works on its final estimates. EPA also released its own social cost values. The IWG has directed agencies to use their “professional judgment to determine” which estimates to use.

In Sep. 2023, President Biden directed federal agencies to consider the social cost of greenhouse gas estimates in their budgets.

Why it Matters

The “social cost of greenhouse gases (SC-GHGs)” (carbon dioxide, methane, nitrous oxide) quantifies the net harm to society of adding one ton of emissions of each of these GHGs in a year. SC-GHGs provide a range of dollar estimates that can be used to incorporate the social benefits of reducing emissions into cost-benefit analyses. The estimates also help agencies better consider the costs that GHG emissions impose on society, and calculate the benefit of reducing pollution. When the social cost of GHGs is not part of a government agency’s cost-benefit analysis, there is less regulatory leverage for reducing greenhouse gas emissions.

President Obama created the Interagency Working Group (IWG) in 2009 to create consistent estimates for use across agencies that use the best available science. The IWG published its first estimates of the social cost of carbon (SC-CO2) in 2010 and updated them in 2013. In 2016, the IWG published a technical update that included the social costs of methane (SC-CH4) and nitrous oxide (SC-N2O).

President Trump disbanded the IWG in March 2017. Federal agencies employed a much more limited social cost calculation that did not account for global damages and used a significantly higher discount rate, making their estimates about seven times lower than those used during the Obama administration.

Current Status

On Jan. 20, 2021, President Biden reinstated the IWG and directed the group to publish interim estimates of the social cost of carbon dioxide, nitrous oxide, and methane within 30 days and final ones by Jan. 2022. The IWG is still working on the final estimates. On Feb. 26, 2021, the IWG released interim estimates for agencies to use while the group works on final estimates. The Biden administration has been using these interim values in its rulemakings.

In Dec. 2023, as part of its rule to reduce methane from new and existing oil and natural gas facilities, EPA published a report with lower discount rates and higher values for the social cost of carbon and methane.

Feb. 2021 IWG Interim Estimates

Using 2020 dollars at a 3% discount rate 

Dec. 2023 EPA Report Estimates

Using 2020 dollars at a 2% discount rate 

Social Cost of Carbon $51/ton $190/ton
Social Cost of Methane $1500/ton $1600/ton 

On April 6, 2023, President Biden issued EO 14094 “Modernizing Regulatory Review, which requires the Office of Management Budget (OMB) to revise Circular A-4, a guidance document for federal agencies conducting regulatory analyses. In Nov. 2023, OMB finalized changes to Circular A-4. The proposal would lowers discount rates for agency cost-benefit analyses to 2% and give guidance to agencies to analyze the distributional effects and in some cases, the global effects, of their regulations. However, Circular A-4 is non-binding and explicitly allows agencies to develop their own self-contained approaches to cost-benefit analyses and regulatory review. OMB also finalized similar changes to Circular A-94, a guidance document for federal agencies’ conducting cost-benefit analyses on their spending.

On Sep. 21, 2023, President Biden directed federal agencies to consider the social cost of greenhouse gas estimates in their budgets, including when reviewing discretionary grant applications, setting administrative penalties, and evaluating international financial assistance. The administration also directed federal agencies to consider the estimates during procurement processes and National Environmental Policy Act (NEPA) environmental reviews.

previous administrations
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Nov. 15, 2007 The Ninth Circuit holds that a weakened fuel efficiency rule was arbitrary and capricious because the National Highway Traffic Safety Administration (NHTSA) failed to consider the cost of carbon pollution.

obama administration
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Feb. 2010 The Interagency Working Group on the Social Cost of GHGs (IWG), invoking President Clinton’s EO 12866calculates a social cost of carbon.

Aug. 2016 The IWG publishes the sixth technical update to the SCC. The cost is set at $36/ton.

Aug. 8, 2016 The Seventh Circuit upholds the Department of Energy’s use of the social cost of carbon in a cost-benefit analysis for updated refrigerator efficiency standards.

Trump administration
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March 28, 2017 President Trump’s EO 13783 disbands the IWG and announces that the social cost of carbon technical documents are “withdrawn as no longer representative of governmental policy.” Agencies are directed to revert to older White House guidance on how to do cost-benefit analyses. Under this guidance, an agency can, but is not encouraged or directed to, consider the health and economic costs of carbon pollution. Where agencies do consider the costs of pollution, President Trump tells agencies to rely on an old White House guidance document. That document directs agencies to consider only domestic climate effects and to use higher discount rates. The discount rate adjusts estimates of future climate damage into current dollars to determine what we can spend today to avoid future damage. A higher discount rate lowers the calculated value of preventing future damage

Sep. 28, 2018 BLM publishes a final rule largely repealing the 2016 Methane Waste Prevention Rule that required capture and control of methane emissions from oil and gas operations on federal lands. The rule uses a new interim social cost of methane that considers only domestic impacts of methane and uses a 3% and 7% discount rate, significantly lowering the benefits attributed to the 2016 rulemaking. (visit our Regulatory Tracker page on this rule)

July 8, 2019 EPA repeals the Clean Power Plan and replaces it with the Affordable Clean Energy (ACE) rule. The rule uses a domestic-only social cost of carbon and 3% and 7% discount rates. (visit our Regulatory Tracker page on this rule)

Jan. 10, 2020 The Department of Energy releases a package of energy conservation standards that largely follow the IWG’s approach to the social cost of GHGs, including considering both global and domestic impacts and the full range of discount rates used by the IWG. The agency provides a robust defense of the development of the IWG’s numbers.

April 30, 2020 NHTSA and EPA finalize the SAFE Vehicles Rule using only domestic damage estimates in its social cost of carbon and using 3% and 7% discount rates, reducing the savings in carbon damages. (visit our Regulatory Tracker page on this rule)

Sep. 14 and 15, 2020 EPA releases two rules rolling back methane emissions standards for new and modified oil and gas facilities. These rules estimated the foregone benefits as a result of the rules using an interim domestic social cost of methane developed after the Trump administration withdrew the IWG’s technical documents. This estimate produced significantly lower estimates of benefits than the IWG’s method. EPA acknowledged that the rules would result in increased emissions of methane, VOCs, and HAPs. (visit our Regulatory Tracker page on these rules)

Oct. 13, 2020 EPA released the Steam Electric Reconsideration Rule in which it used a domestic social cost of carbon and 3% and 7% discount rates to calculate the social costs of the rule. (visit our Regulatory Tracker page on this rule)

Biden Administration
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Jan. 20, 2021 President Biden’s EO 13990 reinstates the IWG and directs the group to publish interim estimates of the social cost of carbon, nitrous oxide, and methane within 30 days and final ones by Jan. 2022. The Interagency Working Group is also instructed to recommend to the President where the Social Cost of GHGs should be applied (in what areas of decision-making, budgeting, and procurement) by Sep. 1, 2021, and a process for reviewing and updating them by June 1, 2022.

Feb. 26, 2021 The administration announces an inflation-adjusted version of the Obama-era Social Costs of GHGs as the interim Social Costs of GHGs.

March 8, 2021 Twelve state attorneys general, led by the state of Missouri, file a lawsuit challenging Section 5 of Biden’s EO 13990 regarding the social costs of GHGs. Missouri v. Biden, No. 21-cv-00287 (E.D. Mo. filed Mar. 8, 2021).

April 22, 2021 Ten state attorneys general, led by Louisiana, file another lawsuit challenging EO 13990’s directives regarding the social costs of GHGs and the administration’s release of the interim numbers. Louisiana v. Biden, No. 21-cv-01074 (W.D. La. filed Apr. 22, 2021).

June 2021 Government defendants file motions to dismiss for lack of jurisdiction and failure to state a claim in the Louisiana-led lawsuit. Louisiana v. Biden, No. 21-cv-01074 (W.D. La. filed Apr. 22, 2021); Louisiana v. Biden, No. 21-cv-01074 (W.D. La. filed Apr. 22, 2021).

August 2021The Eastern District of Missouri dismisses the Missouri-led lawsuit, finding plaintiffs lack standing and that their claims are not ripe for adjudication. Plaintiff states file a notice of appeal on Sep. 1, 2021.Missouri v. Biden, No. 21-cv-00287 (E.D. Mo.). 

Sep. 2021 The W.D. of Louisiana clarifies that it will hear the motion to dismiss and motion for preliminary junction in the upcoming hearing originally set for Sep. 16. It also resets the hearing for Dec. 7, 2021 and denies the request to hold the hearing virtually. Louisiana v. Biden, No. 21-cv-01074 (W.D. La.).

Nov. 4, 2021 Senate Republicans publish a letter requesting that the IWG share information about their decision making calculus and process. The letter criticizes the working group’s “opa[city]” as a potential detriment to the American public.

Dec. 3, 2021 Appellant states file briefs to the Eighth Circuit in the Missouri case, arguing that the lower court erred in dismissing the case on standing and that a preliminary injunction is appropriate because separation-of-powers and the APA prohibit the IWG’s the interim values. Missouri v. Biden, No. 21-03013 (8th Cir.). 

Jan. 21, 2022 As requested by the Court’s Dec. 9, 2021 Order, plaintiff states file a supplemental motion on the issue of injury. The federal government files a motion to dismiss for lack of injury. The government’s brief indicates that the IWG intends to publish its final estimates in the summer of 2022. Louisiana v. Biden, No. 21-cv-01074 (W.D. La.).

Jan. 25, 2022 EPA requests nominations for scientific experts to peer review technical support documents from the IWG on the Social Cost of Greenhouse Gases. 

Feb. 11, 2022 The Western District of Louisiana blocks the Biden administration’s use of the Social Cost metrics, citing procedural and separation-of-powers grounds for issuing the injunction. The court finds that the Biden administration must return to the Trump-era discount rates and may only account for domestic effects in its calculations. Louisiana v. Biden, No. 21-cv-01074 (W.D. La.). The Biden administration files a notice of appeal soon after. 

Feb. 15, 2022 The Competitive Enterprise Institute submits a formal request to EPA asking the agency to reconsider its recent fuel economy standards that employ the interim social cost estimates in light of the court’s injunction barring their use.  For more background on the Biden administration’s clean car rules, see our Clean Car tracker page.

Feb. 17-19, 2022 The Biden administration files a brief asking the 8th Circuit to reject the appeal by Missouri and other states. The administration argues that the states lack standing and that the suit over the interim estimates is premature. Missouri v. Biden, No. 21-03013 (8th Cir.).

March 9, 2022 The federal judge in the Western District of Louisiana denies the Biden administration’s motion to stay. Louisiana v. Biden, No. 21-cv-01074 (W.D. La.).

Mar. 16, 2022 The Fifth Circuit stays the Western District of Louisiana’s injunction pending appeal. The court finds that the states challenging the metric are unlikely to succeed on appeal because they lack standing. The court also finds that the injunction would cause the federal government irreparable harm because reliance on the metric is an important early step in agency decision-making. The Biden administration may continue to use its interim estimates pending appeal. Louisiana v. Biden, No. 22-30087 (5th Cir.). States file their reply brief in the Missouri case, alleging that they have standing and that the IWG’s interim values violate the separation of powers doctrine and federal procedural law. Missouri v. Biden, No. 21-3013 (8th Cir.).

Apr. 11, 2022 Democratic members of Congress publish a letter to US Postal Service Inspector General Tammy Whitcomb requesting the updated analysis on the Service’s ongoing fleet replacement to include social cost of carbon evaluations.

Apr. 27–May 2, 2022 The states in the Louisiana case file an application asking the Supreme Court to vacate the Fifth Circuit’s stay order. Ten of the states from the Missouri case ask the Court for permission to file an amicus brief supporting the Louisiana states. Louisiana v. Biden, No. 21A658 (2022).  

May 3-11, 2022 The Biden administration files a brief asking the Fifth Circuit to rule that the Western District of Louisiana erred in issuing the injunction. Twelve states and other advocacy organizations file amici supporting the Biden administration. Louisiana v. Biden, 22-30087 (5th Cir.).

May 9-26 2022 The Biden administration files a response opposing the application to the Supreme Court. Louisiana v. Biden, No. 21A658 (2022). The Supreme Court denies the states’ application to vacate the Fifth Circuit stay. Louisiana v. Biden, No. 21A658 (2022). The case will now continue in the Fifth Circuit.

May 13, 2022 Nine Republican Senators write a letter to OMB, the White House Council of Economic Advisers, and the White House Office of Science and Technology Policy asking for information on the IWG and the updated estimates.

June 16, 2022 The Eighth Circuit hears oral argument in Missouri v. Biden. No. 21-3013 (8th Cir.). In Louisiana v. Biden, appellee states file a brief arguing that they have standing and that the district court had valid grounds for issuing the preliminary injunction. No. 22-30087 (5th Cir.). 

July 18, 2022 The federal government files a reply brief in Louisiana v. Biden, arguing that the states’ brief does not demonstrate standing, in part because it is based on inaccuracies about how the estimates have been used and what EO 13990 requires. No. 22-30087 (5th Cir.).

Oct. 21, 2022 The 8th Circuit Court of Appeals upholds the Biden Administration’s publication of interim “social cost of greenhouse gases” estimates, dismissing a lawsuit brought by thirteen state attorneys general for lack of standing. In affirming the district court’s dismissal, the 8th Circuit holds that the “generalized grievance” raised by the attorneys general does not constitute the “actual injury” necessary to sue, as the Administration’s estimates are merely prospective. Missouri v. Biden, No. 21-3013 (8th Cir. Oct. 21, 2022).

Nov. 11, 2022 As part of EPA’s Supplemental Proposal to reduce methane from new and existing oil and natural gas facilities, EPA publishes a draft report with new estimates for the social cost of greenhouse gases. Though EPA uses the interim estimates for the cost benefit analysis in the proposal, EPA uses the new values in the cost-benefit analysis released in the draft report. The draft report includes a higher social cost of carbon of $190 per ton at a 2% discount, in comparison with the interim estimates which put the social cost of carbon at $51 per ton at a 3% discount. EPA also updates the social cost of methane per ton, the discount rates, and many of the input assumptions and methodologies.

Dec. 7, 2022 The Fifth Circuit hears oral arguments in Louisiana v. Biden. No. 22-30087 (5th Cir.).

Jan. 27, 2023 The Eighth Circuit Court of Appeals denies Missouri and other states’ petition for rehearing en banc. The Eighth Circuit had ruled against the states in the case in an October 2022 decision, holding that the states had not suffered a specific injury and therefore lacked standing to sue. Missouri v. Biden, No. 21-03013 (8th Cir.). 

Feb. 9, 2023 EPA selects a peer review panel of independent experts who will review the agency’s draft SC-GHG estimates.

Mar 8, 2023 The Bureau of Land Management (BLM), a Utah coal company, environmental groups, and other parties reach a settlement agreement that will require the coal company to calculate and submit SC-GHG estimates associated with any future expansion of the disputed mine to BLM. BLM agrees to take these estimates into account in its National Environmental Policy Act (NEPA) review of the disputed mine project. WildEarth Guardians v. Haaland, 2:16-cv-00168 (D. Ut.).

Apr. 5, 2023 The Fifth Circuit Court of Appeals dismisses the case against the Biden administration’s interim estimates. The court holds that Louisiana and the nine other states lack standing because EO 13990 does not require federal agencies to use the estimates in any regulation. The Fifth Circuit also vacates the lower court’s preliminary injunction, which the court had stayed last March. Louisiana v. Biden, No. 22-30087 (5th Cir.).

April 6, 2023 President Biden issues EO 14094 “Modernizing Regulatory Review.”  Among other directives, EO 14094 requires the Office of Management Budget (OMB) to revise Circular A-4, a guidance document for federal agencies conducting regulatory analyses. That same day, OMB proposes changes to Circular A-4. The proposal would lower discount rates for agency cost-benefit analyses to 1.7% and would encourage agencies to analyze the distributional effects and in some cases, the global effects, of their regulations. However, Circular A-4 is non-binding and explicitly allows agencies to develop their own self-contained approaches to cost-benefit analyses and regulatory review. OMB also proposes similar changes to Circular A-94, a guidance document for federal agencies’ conducting cost-benefit analyses on their spending. 

Sep. 21, 2023 President Biden directs federal agencies to consider the social cost of greenhouse gas estimates in their budgets, including when reviewing discretionary grant applications, setting administrative penalties, and evaluating international financial assistance. The administration also directs federal agencies to consider the estimates during procurement processes and National Environmental Policy Act (NEPA) environmental reviews. 

Oct. 10 2023 The Supreme Court denies states’ petition for certiorari in Missouri v. Biden. Missouri and eleven other states had asked the Court to review whether they had suffered sufficient harm to challenge President Biden’s interim social cost estimates. The Supreme Court’s denial keeps the Eighth’s Circuit’s 2022 decision in place. Missouri v. Biden, Docket No. 22-1248 (2023). For more on the cases against the interim values, read our analysis.

Nov. 9, 2023 OMB released its final revisions to Circular A-4, a guidance document for federal agencies conducting economic analyses (e.g., cost and benefits) of regulations. In the guidance, OMB lowers the discount rate for agency cost-benefit analyses to 2 percent, provides guidance for agencies conducting distributional analyses, and explains situations in which agencies can consider the global effects of their regulations. This version supersedes and rescinds the version that has been in effect since 2003. Along with the Circular, OMB also released a document explaining its changes and responding to public and peer review input. OMB also finalized similar changes to Circular A-94, a guidance document for federal agencies’ conducting cost-benefit analyses on their spending.

Nov. 15, 2023 As a supplement to the regulatory impact analysis for its oil and natural gas rule, EPA published “Report on the Social Cost of Greenhouse Gases: Estimates Incorporating Recent Scientific Advances.” Unlike the IWG estimates, EPA’s estimates use a dynamic discounting rate to account for uncertainty in future consumption. EPA’s estimates include a range of values for each greenhouse gas, based on near-term Ramsey discount rates of 2.5%, 2.0%, and 1.5%. The report estimates the social cost of one 2020 metric ton of emissions associated using the 2.0% near-term discount rate at $190 for CO2, $1,600 for methane, and $5,400 for nitrous oxide.

Dec. 22, 2023 The IWG released a memorandum advising agencies considering the social cost of greenhouse gases (SC-GHG) consistent with OMB Circular No. A-4 to use whichever estimates of the SC-GHG they judge to be best suited to the context at hand. This could include the IWG’s interim estimates, the Circular A-4 estimates, or EPA’s new estimates.