10/26/2022 - Biden Administration Status Update

Social Cost of Greenhouse Gas Estimates

by Abby Husselbee, Caroline Jaschke, JD 2023

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The Biden administration is applying its interim estimates in rulemakings while litigation on the estimates continues. The Interagency Working Group’s final estimates are expected to be released soon.

The social cost of greenhouse gases is a metric that federal agencies use to account for the potential economic impacts of their rulemakings on the climate. In 2009, President Obama first convened an interagency working group (IWG) tasked with calculating monetary damages for “an incremental increase in carbon emissions in a given year.” Following these directives, in 2010, the IWG released social cost estimates and published several technical updates, with the most recent update released in 2016. Under President Obama, the IWG released estimates that accounted for global damages and used discount rates of 2.5, 3, and 5 percent.[1] In 2017, President Trump disbanded the IWG and revoked the technical documents that established the estimates. Under President Trump’s executive order, agencies were not required to account for the damages associated with greenhouse gases, and if agencies did consider greenhouse gas emissions as part of a rulemaking, they were directed to only examine domestic damages and use a discount rates of 3 and 7 percent.[2] The Government Accountability Office calculated that by only considering domestic damages, as opposed to global, the estimates were about seven times lower than the ones used under the Obama administration.

During his first week in office, President Biden issued Executive Order 13990, which reestablished the IWG and directed the group to reinstate the metrics for carbon dioxide, nitrous oxide, and methane within 30 days. It also directed the IWG to publish final estimates by January 2022 and recommend processes for applying and periodically reviewing the estimates. In February 2021, the IWG reinstated the 2013 and 2016 values adjusted for inflation. While the IWG has not yet released the updated estimates, the group requested scientific experts to peer review the new estimates. Once the updated estimates are proposed, the IWG will accept comments on its approach.[3]

Shortly after President Biden’s IWG released its interim estimates, states’ attorneys general brought two challenges against the estimates. In Missouri v. Biden, Missouri and 11 other states argued that EO 13990’s imposition of the interim estimates violates constitutional separation of powers and federalism principles and conflicts with statutory authority under the Administrative Procedure Act (APA) and other statutes. The Eastern District of Missouri dismissed the case finding that the states lacked standing.[4] The states appealed the dismissal to the Eighth Circuit, which heard oral arguments on June 16, 2022.

In Louisiana v. Biden, Louisiana and nine other states filed a lawsuit in the Western District of Louisiana arguing that EO 13990’s imposition of the interim estimates violates five environmental statutory provisions and constitutional principles, including the major questions doctrine.[5] The states also argued that the estimates violate the APA because they were not subject to notice-and-comment and are arbitrary and capricious.[6] Writing for the Western District of Louisiana, Judge Cain agreed with the states and blocked the Biden administration’s use of the interim estimates, finding that the states were likely to succeed on the merits. The court ordered the Biden administration to stop using the interim estimates and to return to the Trump-era practices of only accounting for domestic effects and using higher discount rates.

The Biden administration appealed that order to the Fifth Circuit, which agreed with the Biden administration and granted the motion to stay Judge Cain’s preliminary injunction pending the appeal. The Fifth Circuit’s order finds that the government is likely to succeed on the merits because the states lack standing to challenge the interim estimates.[7] Oral argument for the appeal in the Fifth Circuit appeal is scheduled for early December 2022, and in its brief, the federal government argues that the Western District of Louisiana lacked jurisdiction and erred in issuing the injunction.[8]

The ability of cost-benefit analyses to account for positive and negative impacts of reducing greenhouse gas emissions is an important part of policymaking. Additionally, the litigation raises legal questions that have potentially broad implications, including whether litigants have standing to challenge similar actions by an administration and whether lower courts agree with that such an action can be challenged as violating the emerging major question doctrine.

As the cases move forward in the Fifth and Eighth Circuits, we will update our Regulatory Tracker page with the latest filings and any opinions. For more on the legal arguments raised in litigation and some potential ramifications of the cases, see our analysis on the social cost litigation.

[1] A discount rate accounts for the change in the value of money over time. Where a higher discount rate is used, money evaluated in the present is assigned a lower value compared to the future. See What is a Discount Rate?, Corp. Fin. Inst., https://corporatefinanceinstitute.com/resources/knowledge/finance/discount-rate/ (last visited Apr. 1, 2022) [https://perma.cc/P2J4-8REQ].

[2] See, e.g., EPA, Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations, 84 Fed. Reg. 32,520 (Sep. 6, 2019).

[3] EPA, Request for Nominations of Experts for the Review of Technical Support Document for the Social Cost of Greenhouse Gases, 87 Fed. Reg. 3,801, 3,802 (Jan. 25, 2022).

[4] Missouri v. Biden, No. 4:21-cv-00287 at 15, 43 (E.D. Mo. 2021).

[5] The five statutes are the Energy Policy Conservation Act (EPCA), the Clean Air Act (CAA), the National Environmental Policy Act (NEPA) Mineral Leasing Act (MLA), and the Outer Continental Shelf Lands Act (OCSLA).

[6] The federal government also argues against these points. For example, the government argues that interim estimates direct agencies using the estimates to take comments on their use of the estimates. Response, in Opp’n to Application to Vacate at 11, Louisiana v. Biden, No. 21A658 (May 9, 2022). Moreover, some of these claims may already be moot. See OMB, Notice of Availability and Request for Comment on “Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990”, 86 Fed. Reg. 24,669 (May 7, 2021). However, the IWG will release the final estimates following notice and comment and a peer review process, so if any procedural deficiencies were present, they could be cleared.

[7] Ord. Granting Stay, Louisiana v. Biden, No. 22-30087 at *5 (5th Cir. Mar. 16, 2022). The ten states led by Louisiana had asked the Supreme Court to vacate the Fifth Circuit’s order, but the Supreme Court denied the states’ application. This means that the preliminary injunction will remain blocked as the appeal continues in the Fifth Circuit.

[8] Brief for Appellants at 44, Louisiana v. Biden, No. 22-30087 (5th Cir. 2022).