ARBITRARINESS REVIEW AND CLIMATE CHANGE.

• Author: Sunstein, Cass R.

In its ideal form, arbitrariness review is an instrument for promoting "deliberative democracy"--a system that combines reason-giving with political accountability. Under arbitrariness review in its current form, courts tend to embrace the "hard look doctrine," which has a procedural component, requiring agencies to offer detailed justifications, and also a substantive component, in which courts assess the reasonableness of agencies' choices on the merits. These are serious constraints on the executive branch, and they also reduce the risk of large-scale instability in government, in which scientific and economic judgments are overridden by political considerations. With respect to regulatory policy, it is not enough to say that "elections have consequences."

For climate change in particular, the "social cost of carbon," or more broadly the "social cost of greenhouse gases," is sometimes described as "the most important number you've never heard of." A key reason is that within the executive branch, the stringency of regulation of greenhouse gases emissions sometimes depends on that number. In the United States, the relevant numbers were challenged in court under the administrations of Barack Obama (where they were upheld), Donald Trump (where they were struck down), and Joseph Biden (where they were struck down, though the ultimate fate of the relevant ruling is unclear). Legal challenges to the social cost of carbon raise fundamental questions about the role of science, economics, and politics in judicial review of agency action, and about the relationship between courts and the administrative state.

With respect to the social cost of carbon, I aim to defend the following propositions: (1) A decision to use the global number, as opposed to the domestic number, would be straightforward to defend against an arbitrariness challenge; a decision to use the domestic number, as opposed to the global number, would be more challenging to defend against an arbitrariness challenge. (2) A decision to use a low discount rate, such as two percent, would be straightforward to defend against an arbitrariness challenge; a decision to use a very low discount rate, such as one percent, or a high discount rate, such as seven percent, would be exceedingly difficult to defend against an arbitrariness challenge. (2) A wide range of decisions-involving, for example, climate sensitivity and the damage function-raise difficult questions in science and economics; they should be straightforward to defend against an arbitrariness challenge, but only if they follow from a reasoned justification. (4) Approaches that take account of equity-including "prioritarianism"-should be defensible against an arbitrariness challenge, as should be a refusal to adopt such approaches, but here again, a reasoned justification is required. ($) A decision to "back out" a social cost of carbon, from some specific target, would be challenging to defend against an arbitrariness challenge.

A general lesson, with relevance to lawyers and judges, involves the range of arbitrary and nonarbitrary choices for the social cost of carbon. Another lesson, with even broader implications, is that judicial review of the social cost of carbon should (and likely will) involve a procedural hard look, not a substantive hard look. A procedural hard look is important to defend against failures of both deliberation and democracy; but in this context, a substantive hard look would strain judicial capacities.

1. SEVEN CLAIMS 993 II. DELIBERATIVE DEMOCRACY AND ARBITRARINESS REVIEW 1000 A. APA: Text, History, and "Mood" 1000 B. A Very Brief Note on Institutional Competence 1005 C. Hard Look Review: Procedural and Substantive 1006 III. THE SOCIAL COST OF CARBON: HISTORICAL NOTES 1010 A. 2010-2016 1011 B. The Social Cost of Carbon, 2017-2021 1016 C. The Return of the Repressed: 2021 1017 IV. THE SOCIAL COST OF CARBON IN COURT 1019 V. CHOICES 1022 A. Domestic or Global 1025 B. The Discount Rate 1028 C. Equity 1032 D. The Integrated Assessment Models 1036 E. Climate Sensitivity 1038 F. The Damage Function 1039 G.Uncertainty 1040 H. Backing Out a Number? 1041 CONCLUSION 1045 I. SEVEN CLAIMS

   What are the costs of climate change? The standard answer is given by "the social cost of carbon," or more broadly "the social cost of greenhouse gas emissions," which is meant to quantify and monetize the harm done by a ton of such emissions. (1) (For ease of exposition, I shall use the narrower term--the "social cost of carbon"--here.) Sometimes described as "the most important number you've never heard of," (2) the social cost of carbon helps determine the stringency of numerous regulations designed to reduce greenhouse gas emissions. (3) With respect to motor vehicles, power plants, and other sources of emissions, a high number will tend to support aggressive regulations, while a low one will tend to support modest regulations. (4)

   My principal goal in this Article is to explore the relationship between judicial review of agency action and the social cost of carbon, with particular attention to arbitrariness review. In the process, I aim to provide a kind of lawyer's primer, or guide for the perplexed, with respect to the social cost of carbon and the associated legal issues. I also aim to defend some general claims about the appropriate role of the federal judiciary in overseeing the operations of the administrative state. In brief, I shall defend an approach to arbitrariness review that contains a "procedural hard look," calling for requirements of deliberation and reason-giving, while counselling against an aggressive "substantive hard look," carefully policing agency decisions on the merits. As we shall see, the arithmetic of climate change, as we might conceive of it, requires an understanding of the central issues of science and economics that must be assessed in order to justify regulatory choices. For lawyers and judges, coming legal challenges raise substantive questions and institutional problems of the first order, ultimately with constitutional resonances. To see why, it will be useful to begin with one of the greatest battles in the long history of American public law--something like Ali-Frazier I, the Fight of the Century. (5)

   In the right corner (or was it the left?) stood Chief Judge David Bazelon, architect of much of modern arbitrariness review, a firm advocate of strengthening administrative processes in order to promote political legitimacy and to improve outcomes, and a deep skeptic about judicial competence with respect to technical questions. In the left corner (or was it the right?) stood Judge Harold Leventhal, architect of the hard look doctrine, and a firm advocate of some kind of judicial scrutiny of the substantive merits, to ensure that processes are not a charade, and to promote political legitimacy and improve outcomes.

   The debate came to a head in Ethyl Corp. v. EPA, (6) a singularly complex decision that was long featured in administrative law casebooks, because it framed discussions of arbitrariness review so well. The majority opinion was written by Judge J. Skelly Wright, but both Bazelon and Leventhal saw fit to write separately in concurrence. Bazelon summarized his approach to administrative law in two brisk sentences, a kind of cri de coeur:

   [I]n cases of great technological complexity, the best way for courts to guard against unreasonable or erroneous administrative decisions is not for the judges themselves to scrutinize the technical merits of each decision. Rather, it is to establish a decision-making process that assures a reasoned decision that can be held up to the scrutiny of the scientific community and the public. (7) An entire book could easily be written about that sentence. Judge Bazelon's approach should be seen as a distinctive answer to the acute anxieties--constitutional and otherwise--about the power and discretion of modern administrative agencies. (8) His approach is a particular outgrowth of the period between 1932 and 1974, which included President Franklin Delano Roosevelt's New Deal, the constitutional challenge to its basic foundations, the enactment of the Administrative Procedure Act, and the largely unanticipated rise of notice-and-comment rulemaking as a principal vehicle by which agencies made law and policy. (9) After all, administrators are not elected, and they might be influenced by groups with a special interest in the outcome; they might also blunder. When they wield broad discretion, what is the appropriate corrective? Alert to the constitutional background but avoiding the heavy constitutional artillery, (10) Bazelon answered with "a decision-making process" (11) in which agencies would exclude no one, listen to a wide variety of people, carefully consider diverse concerns, and offer a reasoned decision, complete with a detailed justification (essentially showing their work), and exposing it to public scrutiny and review. Under Bazelon's approach, that open process, ensured by courts and undertaken by agencies, might be seen as a surrogate safeguard for those processes specified in the Constitution itself.

   At the same time, Bazelon rejected the idea that courts should closely scrutinize the merits. He insisted that judges lacked the competence to undertake that task, at least for highly technical issues. As he put it, "The process making a de novo evaluation of the scientific evidence inevitably invites judges of opposing views to make plausible-sounding, but simplistic, judgments of the relative weight to be afforded various pieces of technical data." (12) He feared "substantive review of mathematical and scientific evidence by technically illiterate judges," seeing it as "dangerously unreliable." (13) For that reason, he argued that judges should restrict themselves to improving "administrative decision-making by concentrating our efforts on strengthening administrative procedures." (14) (He might have...