09/27/2017 - Regulatory Tracker

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

by EELP Staff

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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, providing a range of dollar estimates that can be used to incorporate the social benefits of reducing emissions into cost-benefit analyses. It helps 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. Agencies began to consider the social cost of carbon in their estimates as early as 2008.

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 their 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 cost of methane (SC-CH4) and social cost of nitrous oxide (SC-N2O).

President Trump disbanded the Interagency Working Group on the Social Cost of Greenhouse Gases (GHGs) in his March 2017, Executive Order 13783 and withdrew the technical documents it created. In rulemakings during the Trump administration, agencies used a much more limited SC-GHGs 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. The Trump administration published 22 final rules that mention the social cost of GHGs.

Current Status

On Jan. 20, 2021, President Biden signed the Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis that reinstated the Interagency Working Group on the Social Cost of GHGs, 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 EO also directed the IWG 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.

The IWG released interim numbers on Feb. 26, 2021. Two sets of Republican state attorneys general, led by Missouri and Louisiana, have since challenged Biden’s directive in EO 13990 to update the social cost of GHGs. The Missouri case was dismissed but has been appealed to the Eighth Circuit.

Timeline of Events

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, invoking President Clinton’s EO 12866calculates a social cost of carbon.

Aug. 2016 The Interagency Working Group on the Social Cost of GHGs 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 Executive Order on Promoting Energy Independence and Economic Growth disbands the Interagency Working Group on the Social Cost of GHGs, 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.

Oct. 10, 2017 EPA releases a proposal to repeal the Clean Power Plan, which includes an analysis using the Trump administration’s social cost of carbon approach. The analysis counts only direct domestic benefits of carbon mitigation activities rather than considering the potential benefits worldwide. The new approach uses a higher discount rate (7%) than the rate used in standard economic practice (3%). 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 value of preventing future damage and makes it easier to portray current regulations as having costs that exceed their benefits.

July 26, 2018 A group of six senators submit comments to the Federal Energy Regulatory Commission (FERC) as it considers revising its Pipeline Policy Statement. The senators call on FERC to incorporate the social cost of carbon into its process for evaluating natural gas pipelines.

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. The rule also made other changes to its cost benefit analysis that reduced the societal benefits of lowering GHG emissions counted. (visit our Regulatory Tracker page on this rule)

Sep. 14 and 15, 2020 EPA released 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 Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis reinstates the Interagency Working Group on the Social Cost of GHGs, 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 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 Biden’s EO 13990 for its instructions 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 4, 2021 Government defendants file a motion to dismiss the Missouri-led lawsuit for lack of jurisdiction and failure to state a claim. Missouri v. Biden, No. 21-cv-00287 (E.D. Mo. filed Mar. 8, 2021).

June 28, 2021 Government defendants filed a motion 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).

July 29, 2021 The court in the Louisiana-led suit granted plaintiffs’ request to expedite the case and set a hearing on their motion for a preliminary injunction for Sept. 16, 2021. Louisiana v. Biden, No. 21-cv-01074 (W.D. La. filed Apr. 22, 2021).

August 25, 2021 The court in the Missouri-led lawsuit holds a hearing on the plaintiffs’ motion for a preliminary injunction and defendants’ motion to dismiss. Missouri v. Biden, No. 21-cv-00287 (E.D. Mo. filed Mar. 8, 2021).

Aug. 31, 2021 The Eastern District of Missouri dismisses the Missouri-led lawsuit, finding plaintiffs lack standing and that their claims are not ripe for adjudication. Missouri v. Biden, No. 21-cv-00287 (E.D. Mo.)

Sep. 1, 2021 Missouri and twelve other states file a notice of appeal of the district court’s order dismissing their case. Missouri v. Biden, No. 21-cv-00287 (E.D. Mo.)

Sep. 16, 2021 The court in the Louisiana-led lawsuit holds a hearing on plaintiffs’ motion for a preliminary injunction. Louisiana v. Biden, No. 21-cv-01074 (W.D. La. filed Apr. 22, 2021).