States' Challenge to Use of "Social Cost of Greenhouse Gases" in Federal Policymaking Dismissed

The U.S. Court of Appeals for the Fifth Circuit on April 5, 2023, dismissed the state of Louisiana's challenge to federal agencies use of the "social cost of greenhouse gases" in federal decision making.¹ Several Republican-led states joined the lawsuit, which stems from a challenge to President Biden's Executive Order (EO) 13990, Section 5, 86 Fed. Reg. 7037 (Jan. 20, 2021) ordering a working group to formulate guidance for federal agencies on the "social costs of greenhouse gases."

The EO required that the working group establish a dollar amount estimate for the cost of greenhouse gases (carbon, methane and nitrous oxide emissions) for federal agencies to utilize in making all manner of agency policymaking decisions. The working group essentially adopted the conclusions of a previous working group formed by the Obama Administration, which were subsequently invalidated by the Trump Administration. The Biden Administration working group essentially reinstated the Obama era social costs of greenhouse gas emissions, as adjusted for inflation. The challenging states had obtained a preliminary injunction by the U.S. District Court for the Western District of Louisiana prohibiting federal agencies from utilizing the social costs of greenhouse gas emissions in federal policymaking.²

Though the court did not address the merits of the challenging states' argument, the Fifth Circuit ruled that the states lack standing to challenge the Biden Administration's reinstatement of the Obama-era social cost of capital. The three-judge panel of the Fifth Circuit determined that the states lacked standing at this stage because the alleged injuries to the states from potential environmental regulations based on the social cost of greenhouse gas emissions was too speculative, not current injuries or damages. The Fifth Circuit ruled that the states' claims of harm "rely on a chain of hypotheticals: federal agencies may (or may not) premise their actions on the [estimates of the social costs of greenhouse gas emissions established by the Biden Administration] in a manner that may (or may not) burden the states."³

Given the procedural nature of the rulings, the legality of the use of the social costs of greenhouse gas emissions remains uncertain. Despite the challenges, the Biden Administration's Interagency Working Group continues to develop a new paradigm for the social cost of greenhouse gases that incorporate recommendations from the National Academies of Sciences, Engineering and Medicine.⁴ Guidance from Biden's Interagency Working Group was expected in 2022 but has been delayed, and the administration has yet to provide guidance on when the new social costs of greenhouse gas emissions will be released for public comment.

Despite the setbacks in court, it is expected that the states will continue to challenge the substance of the use of the social costs of greenhouse gas emissions, albeit the challenges will likely await federal policymaking.

Notes:

¹ Louisiana v. Biden (U.S.D.C. Case No. CV 2:21-1074) (5th Cir. Apr. 5, 2023) (Emphasis in original).

² See Louisiana v. Biden, 585 F. Supp. 3d 840 (W.D. La. 2022).

³ Louisiana v. Biden (5th Cir.) pg. 3. A similar case in the U.S. Court of Appeals for the Eighth Circuit reached a similar result, dismissing a challenge brought by the state of Missouri to the use of the social costs of greenhouse gases by federal agencies due to the state's lack of standing. See Missouri v. Biden, (Case No. CV 21-3013) (en banc denied).

⁴ See Valuing Climate Damages: Updating Estimation of the Social Cost of Carbon Dioxide, The National Academies of Sciences, Engineering and Medicine (The National Academic Press) (Jan. 2017).