Lawsuit foreshadows feud over Biden’s social cost of carbon

By Maxine Joselow | 04/05/2021 06:51 AM EDT

Legal claims by Republican attorneys general preview the courtroom brawls that will likely ensue once the Biden team finalizes a new social cost of carbon.

Missouri Attorney General Eric Schmitt is leading an effort among Republican attorneys general to challenge efforts by the Biden administration to adjust the social cost of carbon.

Missouri Attorney General Eric Schmitt is leading an effort among Republican attorneys general to challenge efforts by the Biden administration to adjust the social cost of carbon. Bill Greenblatt/UPI/Newscom

Red states that sued the Biden administration for tinkering with the estimated cost of emitting greenhouse gases may have fired a premature opening shot in the legal war over the president’s climate agenda, environmental lawyers say.

But the lawsuit provides a preview of the courtroom brawls that will ensue once the Biden team finalizes a new social cost of carbon, a key metric that assigns a dollar value to the harm caused by planet-warming emissions.

"I think this particular complaint is unlikely to go anywhere," said Hana Vizcarra, a staff attorney at the Environmental & Energy Law Program at Harvard Law School. "But it’s a precursor to what we’re going to see in response to any rulemaking that comes out of this administration."


The Republican attorneys general of 12 states launched their aggressive legal bid last month. Their complaint, filed in the U.S. District Court for the Eastern District of Missouri, targets Biden’s Jan. 20 executive order on climate change (E&E News PM, March 8).

The order created an interagency working group tasked with recommending an interim social cost of carbon within 30 days — and a final social cost of carbon by January 2022.

The working group last month endorsed an interim number of $51 per ton. Under former President Trump, the figure had fallen to as little as $1 per ton (Climatewire, March 1).

In their complaint, the attorneys general argued that Biden lacked the authority to raise the climate metric under the Constitution, which they said gives that power to Congress. They added that the interim social cost of carbon would devastate key sectors of the American economy.

"If the Executive Order stands, it will inflict hundreds of billions or trillions of dollars of damage to the U.S. economy for decades to come," the lawsuit says. "It will destroy jobs, stifle energy production, strangle America’s energy independence, suppress agriculture, deter innovation and impoverish working families."

David Doniger, senior strategic director of the Climate & Clean Energy Program at the Natural Resources Defense Council, said he stifled a laugh when he looked at the lawsuit.

"It was hard not to laugh out loud reading the complaint, and I don’t mind being quoted saying that," he said.

Doniger said the states’ lawsuit is premature because it targets the interim social cost of carbon, which has yet to be finalized or incorporated into regulations. The complaint may be intended as more of a messaging tool to signal that red states are resisting Biden’s early moves on climate, he said.

"There are some very wild constitutional claims," Doniger said. "It’s difficult to figure out what they’re really thinking, other than when you’re making essentially a political lawsuit, you’re going to bang as many drums and cymbals as you can."

Montana Attorney General Austin Knudsen (R) said in a statement to E&E News that the legal challenge was necessary to prevent regulatory overreach by Biden.

"If left unchecked, this illegitimate dictate from the Biden administration will be the precursor for them to try and further dictate how Montanans live our lives — from the cars and pickups we drive to the types of appliances in our home," said Knudsen, who helped bring another recent lawsuit over Biden’s decision to revoke a key permit for the Keystone XL pipeline (Energywire, March 18).

"This is picking right up where Obama’s war on Montana energy production left off and will also be used to needlessly clamp down on our farmers and ranchers," he added.

The office of Missouri Attorney General Eric Schmitt (R), who spearheaded the legal challenge, pushed back on the notion that the complaint was premature.

"Using the ‘Interim Values’ published by the Interagency Working Group, our Office did an analysis based on annual emissions and found that the ‘social costs’ related to those greenhouse gases amounted to billions, potentially trillions, in costs that would be offset by federal agencies through expansive regulations," spokesperson Chris Nuelle said in an email to E&E News.

"It’s easy to see how these ‘interim values’ represent a blank check handed to federal agencies to issue regulations as they please, which is why we had to take immediate action," he said.

Domestic vs. global impacts

The Republican attorneys general dropped an important clue as to how they plan to challenge Biden’s final social cost of carbon due in 2022, legal experts said.

Midway through the complaint, the attorneys general argued that the Biden administration shouldn’t have considered the impacts of climate change outside the United States.

Calculating the costs and benefits of greenhouse gas emissions on a global scale is an "inherently speculative task," the states argued.

The "calculations involve attempting to predict future developments in human technology and innovation, future mitigation strategies performed by the world’s 195 nations, and global reductions in greenhouse gas emissions — another inherently speculative task," they added.

The debate over domestic versus global impacts is likely to resurface in litigation over the final climate metric, said Bethany Davis Noll, executive director of the State Energy &am; Environmental Impact Center at NYU School of Law.

But the Biden administration will be on solid legal ground if it continues to take a global approach following a key court decision last year, Noll said.

The U.S. District Court for the Northern District of California last year scrapped the Trump administration’s rollback of the Obama-era methane waste prevention rule, which aimed to prevent oil and gas producers from venting and flaring natural gas on public lands.

In a sharply worded ruling, Judge Yvonne Gonzalez Rogers rebuked the Bureau of Land Management for failing to heed an interagency working group’s findings on the global nature of climate pollution (Greenwire, July 16, 2020).

"As the [interagency working group] stated in 2015, these damages must be considered globally ‘because emissions of most greenhouse gases contribute to damages around the world and the world’s economies are now highly interconnected,’" wrote the judge, who was appointed during the Obama administration. "This approach was developed over several years through robust scientific and peer-reviewed analyses and public processes, and represents the best available science on this issue."

Noll said Biden’s interagency working group will be able to rely on scientific advances showing that when greenhouse gases are emitted in the United States, they cause impacts such as extreme heat and flooding in other countries — and vice versa.

"The court found that the agency had ignored the best available science, and the science behind this is just going to get stronger," Noll said.

Discount rates

Another debate that could flare in future litigation over the social cost of carbon is whether to tweak a wonky tool called a discount rate.

For decades, economists have used the tool to predict how the value of money declines over time due to inflation and other factors. Under a 3% discount rate, for instance, a dollar today would be worth 97 cents in a year.

When crafting climate regulations, federal agencies use discount rates to represent the value of avoiding future harms due to global warming. The lower the discount rate, the more value is placed on spending money today to prevent harms to future generations.

The Obama administration used a standard 3% discount rate, resulting in a social cost of carbon of $52 per ton. The Trump administration often relied on a 7% discount rate, resulting in a figure of as little as $1.

But in a recent paper, two high-profile economists argued that the Biden administration should embrace a 2% discount rate, leading to a social cost of carbon of $125 per ton (Climatewire, Jan. 14).

In their lawsuit, the Republican attorneys general expressed concern that "the task of selecting a discount rate is highly indeterminate" and "speculative." They added that a lower discount rate could justify costly new climate regulations that affect every American.

"The use of such numbers necessarily entails a great expansion of the scope and reach of the federal government’s regulatory power, reaching into every aspect of everyday life," they wrote.

Hannah Perls, a legal fellow with Harvard Law School’s Environmental & Energy Law Program, said she still expects the Biden administration to lower the discount rate in its final social cost of carbon.

Noll of NYU’s State Impact Center agreed, saying higher discount rates effectively minimize the value of protecting future generations from sea-level rise and the other impacts of a warming world.

"Putting aside the legal issues here, if you use a 7% discount rate, basically what you’re saying is you don’t care about your grandkids," she said.

‘Conditions for liberty to flourish’

Finally, the attorneys general argued that the traditional social cost of carbon ignores the benefits of fossil fuel production.

"Affordable food and energy production lift millions of people out of poverty, eliminate hunger, promote economic development and opportunity, create millions of jobs, enable innovation and entrepreneurship, encourage industry and manufacturing, promote America’s energy independence, and create the conditions for liberty to flourish," they wrote.

"These benefits enrich the entire world, and yet the Biden Administration gave them little or no weight in its calculation of the ‘social cost’ of carbon dioxide, methane and nitrous oxide," they added.

Mark Barron, a partner at BakerHostetler LLP who has represented oil and gas companies in energy litigation, said he agrees with the attorneys general on this point.

"The traditional social cost of carbon methodology doesn’t actually include any economic analysis of the benefits of petroleum production," Barron said.

The Biden administration should consider "whatever the societal benefits are of the use in pharmaceuticals, or just the general economic benefits of the ability to have scaleable and affordable energy for things like transportation," he said.

So far, Biden has indicated that he’s more inclined to end direct subsidies to the oil industry, which critics have said ignore the negative externalities of fossil fuels, such as health conditions tied to air pollution.

In January, the president signed another executive order on climate change that directs the heads of federal agencies to "ensure that, consistent with applicable law, federal funding is not directly subsidizing fossil fuels."