Fifth Circuit Permits The Use Of The Social Cost Of Carbon, For Now

• Jurisdiction: United States,Federal
• Law Firm: Pillsbury Winthrop Shaw Pittman
• Subject Matter: Corporate/Commercial Law, Environment, Litigation, Mediation & Arbitration, Compliance, Environmental Law, Trials & Appeals & Compensation, Climate Change, Clean Air / Pollution
• Author: Ms Anne Idsal Austin and David M. McCullough
• Published date: 10 May 2023

The court's decision allows the Biden administration to further develop the Social Cost of Carbon (SCC) but leaves open the possibility of future judicial scrutiny of its implementation.

TAKEAWAYS

The Fifth Circuit's ruling allows the federal agencies to factor in the costs of additional greenhouse gas (GHG) emissions when considering rules, regulations and actions.

The court's finding that plaintiffs lacked standing may change the timing of when stakeholders challenge future agency actions.

With the Biden administration poised to substantially increase the Social Cost of Carbon (SCC), businesses should closely follow federal and state regulatory developments that will likely result in more stringent GHG reduction requirements that could affect their operations and bottom lines.

On April 5, 2023, the U.S. Court of Appeals for the Fifth Circuit dismissed Louisiana's challenge to the Biden administration's interim Social Cost of Carbon (SCC) estimates, citing a lack of standing. Louisiana, along with nine other states, sought to prevent federal agencies from using the SCC in their decision-making.

While the Fifth Circuit's ruling permits the Biden administration to continue to develop the SCC, questions remain regarding the SCC's implementation, scope and permissible uses.

The Social Cost of Carbon, Explained

The SCC is an attempt by the federal government to estimate the dollar cost of each additional ton of carbon emissions associated with a specific agency action. Beginning with the Reagan administration, the White House has directed federal agencies to perform cost-benefit analyses when promulgating many different types of new agency rules, regulations or actions.

First promulgated by the Obama administration in 2010, the SCC offers a tool to federal agencies assessing the costs and benefits of their decisions to help quantify the climate change-related impacts of a proposed course of action into the traditional cost-benefit analysis process.

The Obama administration convened multiple interagency working groups to develop SCC values for agencies to use and set the SCC at around $43 a ton. The Trump administration substantially lowered the SCC values, choosing only to consider emissions in its modeling that originated from the United States and estimating the SCC to be between $3 - $5 per ton.

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