Debate Over Social Cost of Carbon-Driven Regulations Is Heating Up
| Author | Ethan Shenkman |
| Position | Partner in the environmental practice at Arnold & Porter |
| Pages | 19-19 |
SEPTEMBER/OCTOBER 2021 | 19
Reprinted by permission from The Environmental Forum®, September/October 2021.
Copyright © 2021, Environmental Law Institute®, Washington, D.C. www.eli.org.
Private Practice, Public Policy
PRESIDENT Biden has pledged
to create a “100 percent carbon
pollution-free” power sector by
2035, with an interim goal to achieve
80 percent clean power by 2030. But
how much will it cost to get there? And
will the benets outweigh the costs?
e estimated net benets of a na-
tional clean electricity standard are
“large, widespread, and far outweigh
the costs,” concluded a recent report by
Clean Energy Futures, a collaboration
of researchers from multiple universi-
ties. e study estimated a standard
of 80 percent by 2030 would generate
$637 billion in climate-related ben-
ets — far outweighing their projected
costs of $342 billion.
e estimated ben-
ets were calculated
using a social cost of
carbon gure of $50
per metric ton.
e SCC is an esti-
mate in dollars of the
cumulative long-term damage caused
by one ton of CO2 emitted in a spe-
cic year. It also represents an estimate
of the monetized benet of avoiding or
reducing one ton of CO2 emissions.
It’s primarily used in calculating the
costs and benets of climate-related
regulations, and is expected to play a
central role in major Biden initiatives
seeking to reduce greenhouse gas emis-
sions from vehicles, power plants, oil
and gas facilities, and more.
Not everyone is a proponent of the
SCC metric, however. A fellow with
the Competitive Enterprise Institute,
for example, recently called it “too
speculative and easily manipulated
for partisan ends to guide policy deci-
sions with hundred-billion-dollar price
tags.”
e SCC has a volatile history. In
2009, the Obama administration estab-
lished an Interagency Working Group,
or IWG, to develop the science behind
the SCC, as well as the social cost of
methane and nitrous oxide — green-
house gases that are more potent than
CO2 but emitted in smaller quantities.
e IWG estimated the 2020 SCC
at $26 per ton in its 2010 report and
at $42 in its 2016 report. e Trump
administration, arguing that benet-
cost assessments should focus only on
domestic benets of CO2 reductions,
as opposed to the much larger global
benets, lowered the SCC to $7 per
ton. President Trump disbanded the
IWG in March 2017. President Biden
promptly reestablished it.
e IWG’s interim report, pub-
lished last February, pegged the 2020
SCC at $51 per ton. e IWG took
public comment and will publish -
nal updated SCC
estimates in January.
Many observers an-
ticipate that the nal
estimates will be high-
er. Economists Joseph
Stiglitz and Nicholas
Stern argue that the
social cost of carbon is actually $100
per ton or higher.
Others question whether the SCC
can or should be used in reviews of
federal agency decisions under the
National Environmental Policy Act.
However, the Council on Environ-
mental Quality, which administers
the statute, recently armed that the
SCC “can be a useful measure to assess
the climate impacts of GHG emission
changes for federal proposed actions.”
And the secretary of the interior has di-
rected sta to use the metric in NEPA
analyses.
A coalition of states led by Missouri
are pursuing litigation in federal court
seeking to block the use of the SCC
in rulemaking, and another group
of states led by Louisiana has asked
a federal judge to block the IWG’s
work, referring to the adoption of a
federal SCC as a “unilateral and arbi-
trary attack on state sovereignty and
individual liberty.” Louisiana Attorney
General Je Landry alleges, “is ‘so-
cial cost’ overreach revives an Obama-
era scheme that unnecessarily forces
the monetary cost of a global issue on
American governments, businesses,
and families.”
e Department of Justice has
launched a forceful defense of the
SCC, arguing that the metric is not
subject to judicial review on jurisdic-
tional grounds. But even if these early
salvos by the states do not succeed, they
are rehearsals for arguments to come
in challenges to nal rulemakings and
agency decisions that rely on the SCC.
EPA has already employed the SCC in
a number of recently proposed rules
and actions, and has utilized the IWG’s
work to create a new Social Cost of
Hydrouorocarbons metric.
e Federal Energy Regulatory
Commission — under the helm of
Biden-appointed Chairman Richard
Glick, who has been outspoken on
GHG issues — recently solicited pub-
lic comment on a series of questions
relating to the SCC in approving new
natural gas transportation facilities un-
der NEPA and Section 7 of the Natu-
ral Gas Act.
Do these statutes authorize or man-
date the use of the SCC? Are there
specic remedies the commission may
impose based on the metric? How can
the SCC be used to evaluate whether
a proposed project meets the public
convenience and necessity standard, or
has “signicant” impacts for purposes
of NEPA? Are there alternatives to the
SCC tool? Practitioners eagerly await
answers to these important questions.
Debate Over Social Cost of Carbon-
Driven Regulations Is Heating Up
Trump tagged it at $7
per ton of CO2. Some
experts see the igure
as high as $100
Ethan Shenkman is a partner
in the environme ntal pract ice at
Arnold & Porte r. Email at ethan.
shenkman@arnoldporter.com.
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