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Why it Matters
A “social cost of carbon” is a powerful tool. It helps agencies better consider the costs that carbon emissions impose on society, and calculate the benefit of reducing pollution. When the social cost of carbon is not part of a government agency’s cost-benefit analysis, there is less regulatory leverage for reducing greenhouse gas emissions.
President Trump disbanded the Interagency Group on the Social Cost of Greenhouse Gases (GHGs) and withdrew the technical documents they created. 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 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. The Interagency Working Group 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.
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.
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.
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Working Group on the Social Cost of GHGs, and announces that the social cost of carbon technical documents are “withdrawn as no longer representative of governmental policy.”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.
Early Biden Actions
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).