The social cost of greenhouse gases (or social cost of carbon) is a metric that helps federal agencies account for the potential economic impacts of their rulemakings on climate. President Trump restricted how agencies could consider social cost of greenhouse gases (GHGs), but President Biden reinstated the interagency working group (IWG) that publishes the social cost estimates and directed the IWG to restore the metric. In February 2021, the IWG adopted interim social cost estimates for agencies to use while the group works to update the estimates.
In two separate lawsuits, states challenged the Biden administration’s interim social cost estimates as violating the US Constitution and environmental and procedural statutes.[1] In February 2022, a federal court agreed with the states and blocked the Biden administration from using its estimates in rulemakings by issuing an injunction.[2] However, the Fifth Circuit stayed that injunction,[3] on May 26, 2022, the Supreme Court declined to vacate the Fifth Circuit’s order.
We saw some of the potential implications of preventing the administration from using its social cost of GHG estimates when the injunction was effective; the White House Office of Management and Budget (OMB) identified at least 38 rules that agencies would delay releasing because of the injunction.[4] If courts were to prevent the Biden administration from using the interim or final estimates, the administration might have to reconsider its upcoming climate actions. For example, opponents of EPA’s GHG vehicle standards were quick to ask EPA to reconsider its 2023 GHG vehicle standards on the basis that the cost-benefit analysis of that rule relied on the interim social cost estimates. Additionally, an adverse decision for the Biden administration could limit longstanding presidential discretion to oversee agency processes.[5]
In this piece, we analyze the legal arguments for the Biden administration’s continued use of the social cost of GHGs. To date, the central issue in the litigation is whether the states have standing. The injunction by the Western District of Louisiana was unusual in that the states were not challenging the application of the estimates to a specific rule or agency decision. Rather, they were challenging a process agencies would use in rulemakings. Without a specific harm from a rulemaking, courts have traditionally found that such petitions lack standing.
Background
Interagency Working Group estimates
In 2009, President Obama first convened the IWG and tasked the group with calculating monetary damages for “an incremental increase in carbon emissions in a given year.”[6] Following these directives, the IWG released social cost estimates in 2010 and published several technical updates, with the most recent update released in 2016. Under President Obama, the IWG released estimates that accounted for global damages and used discount rates of 2.5, 3, and 5 percent.[7]
In 2017, President Trump disbanded the IWG and revoked the technical documents that established the estimates. Agencies were not required to account for the damages associated with GHGs, and in cases where agencies considered GHG emissions, they only examined domestic damages and used discount rates of 3 and 7 percent.[8] The Government Accountability Office calculated that removing global damages made the estimates about 7 times lower than the ones used under the Obama administration.
During his first week in office, President Biden issued EO 13990, which reestablished the IWG and directed the group to reinstate the metrics for carbon dioxide, nitrous oxide, and methane within 30 days. It also directed the IWG to publish final estimates by January 2022 and recommend processes for applying and periodically reviewing the estimates. In February 2021, the IWG reinstated the 2013 and 2016 values adjusted for inflation. While the IWG has not yet released the updated estimates, the IWG requested scientific experts to peer review the new estimates. Once the updated estimates are proposed, the IWG will accept comments on its approach.[9]
Recent litigation
Shortly after President Biden’s IWG released its interim estimates, states’ attorneys general brought two challenges against the estimates. In Missouri v. Biden, Missouri and 11 other states argue that EO 13990’s imposition of the interim estimates violates constitutional separation of powers and federalism principles and conflicts with statutory authority under the Administrative Procedure Act (APA) and other statutes. However, the Eastern District of Missouri dismissed the case, finding that the states lacked standing.[10] The states appealed the dismissal to the Eighth Circuit, which will hear oral arguments on June 16.[11]
In Louisiana v. Biden, Louisiana and 9 other states filed a lawsuit in the Western District of Louisiana arguing that EO 13990’s imposition of the interim estimates violates five environmental statutory provisions and constitutional principles, including the Major Questions doctrine.[12] The states also argue that the estimates violate the APA because they were not subject to notice-and-comment and are arbitrary and capricious.[13] Writing for the Western District of Louisiana, Judge Cain agreed with the states and blocked the Biden administration’s use of the interim estimates, finding that the states were likely to succeed on the merits. The court ordered the Biden administration to stop using the interim estimates and to return to the Trump-era practices of only accounting for domestic effects and using higher discount rates. Shortly after, the Biden administration appealed to the Fifth Circuit, and that court agreed with the Biden administration and stayed the injunction, finding that the states lacked standing.[14] The federal government recently filed a brief asking the Fifth Circuit to determine that the Western District of Louisiana lacked jurisdiction over the challenge and erred in issuing the injunction.[15] Twelve states and other organizations filed amici supporting the federal government.[16]
The ten states led by Louisiana had asked the Supreme Court to vacate the Fifth Circuit’s order, but the Supreme Court denied the states’ application. This means that the preliminary injunction will remain blocked as the appeal continues in the Fifth Circuit.
Standing – Why this Case is Unusual
A key issue raised in these cases is whether the states have standing to bring the cases given that the estimates do not impose requirements on the states. Article III of the US Constitution governs which types of cases a court can adjudicate.[17] Here, the federal government argues that the courts cannot hear the merits of the case because the states do not have standing.[18] To establish standing, the states must demonstrate three elements—(1) they have suffered an injury in fact, (2) there is a causal connection between their injury and the estimates, and (3) a favorable decision would be likely to redress their injury.[19] In the government’s briefs, the administration argues that any potential injuries will result from agency rulemakings that use the estimates, and not from the estimates themselves.
Injury in Fact
The Supreme Court defines injury in fact as “‘[a]n invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’”[20] Here, the Biden administration argues that the states have not demonstrated a concrete injury because the social cost estimates do not impose any burdens on the states. Rather, the estimates require federal agencies to consider the estimates in upcoming rulemakings. The Biden administration cites cases such as Summers v. Earth Island Institute, in which the Supreme Court found that a regulation did not injure an organization because it did not impose any requirements on it and only prescribed procedures for an agency.[21] Here, the Biden administration points out that the EO 13990 “governs only agency conduct.”[22]
However, in granting the preliminary injunction, Judge Cain reasoned that states suffered a concrete and particularized injury because the interim estimates impose new regulatory burdens on the states through cooperative federalism programs. Judge Cain reasoned that EPA used the interim estimates in the cost-benefit analysis of a rule that finalized federal implementation plans (FIPs) for states under the ozone National Ambient Air Quality Standards.[23] Although not discussed in the opinion, the Trump administration initially proposed this rule and applied the prior more limited social cost estimates with higher discount rates for the regulatory impact analysis.[24] President Biden’s EPA finalized the rule without significant changes from the proposal. Thus, even though the Biden administration used the interim estimates in the cost-benefit analysis, the federal government’s briefs highlights that the different estimates were not the basis of the rule.[25] Judge Cain also concluded that the interim estimates injure the states by increasing costs, causing project delays, and forcing the states to lose oil and gas production royalties and tax revenue.
By contrast, the Fifth Circuit and the Eastern District of Missouri agreed with the Biden administration and found that the states were not injured. Emphasizing that the states do not face regulatory burdens from the estimates themselves, the Fifth Circuit found that the interim estimates only harm the states when an agency uses them in a rulemaking—at which point the states could challenge the specific agency action. Under the reasoning given by the Fifth Circuit, the rule that finalized the FIPs, rather than the estimates, would be the appropriate action to challenge.
Causal Link
In addition to an injury, plaintiffs must also show that that the injury is “fairly traceable” to the challenged conduct.[26] The Biden administration argues that EO 13990’s imposition of the estimates is not traceable to the states’ alleged injuries. Given that the EO does not require agencies to promulgate specific regulations, the administration notes that an agency must only use the estimates when promulgating regulations that require a cost-benefit analysis that monetizes GHG emissions. Additionally, the administration notes that climate is often only one of several factors agencies consider for such rulemakings.[27]
While Judge Cain focused on cooperative federalism programs, such as the FIPs rule, to conclude that the EO significantly increases states’ costs and harms their revenues,[28] the Fifth Circuit and the Eastern District of Missouri did not find a harm to the states that was fairly traceable to the estimates. Recognizing the “innumerable” factors involved in agency decision-making, the Missouri court held that attempting to predict how the interim estimates would affect an agency’s analysis requires “sheer speculation.”[29]
Redressability
The third element of standing requires redressability: that plaintiffs show that “it is likely, as opposed to merely speculative” that a favorable decision by the court would remedy the injury.”[30] The Biden administration argues that eliminating the interim estimates would not remedy the states’ alleged harms because even without the estimates, agencies can consider GHG emissions in their cost-benefit analyses and arrive at the same regulations.[31] Additionally, the administration notes that EPA could also use other benefits, such as health and safety, to justify such regulations.
Judge Cain, however, concluded that an injunction and vacature would remedy the states’ alleged injury because the order would require agencies to rely on prior executive guidance that only called for a limited consideration of future harms.[32] However, the Fifth Circuit and Eastern District of Missouri both agreed with the federal government’s arguments, reasoning that agencies consider many factors when deciding to issue a regulation and preventing the administration from using the interim estimates would not remedy the injury claimed by the states.[33]
Potential Arguments against the IWG Estimates
Given that the courts have focused on whether the states can bring the case, courts have not yet fully considered the merits of the arguments. Nonetheless, the states’ briefs raise several constitutional and statutory arguments that would be central to the case if a court were to decide the states had standing.
Constitutional Authority to Issue Executive Orders
In both cases, the states assert that President Biden lacked the authority to issue EO 13990. The states in the case led by Missouri specifically argue that the EO violates separation-of-powers and federalism principles.[34] The states in the Louisiana case argue that the Major Questions Doctrine prohibits the administration from using the EO to assert authority over issues of “vast political and economic significance” without explicit Congressional direction.[35] In his opinion, Judge Cain applies the Major Questions Doctrine to agree with the states that there is no Congressional authorization for the government to consider global effects and that the consideration of global effects is likely to impose significant costs.
However, the federal government argues that the president did not need Congressional authority to issue EO 13990 because he was acting pursuant to constitutional authority. In its brief, the government makes clear that the president acted under the Executive Vesting Clause, the Take Care Clause, and the structure of Article II, which give him authority “to supervise the Executive Branch within the bounds of applicable statutes.”[36] Thus, the government argues that the Major Questions doctrine, which relates to Congressional authority, does not apply.[37]
Statutory Authority
The states also raise two statutory arguments. First, the states argue that the Energy Policy Conservation Act (EPCA), the Clean Air Act (CAA), and the National Environmental Policy Act (NEPA) only allow agencies to consider domestic effects and the EO requires agencies to consider international impacts.[38] For example, according to the states, the Clean Air Act’s statutory purpose “to protect and enhance the quality of the Nation’s air resources so as to promote the public health and welfare and the productive capacity of its population” precludes the consideration of international effects.[39]
Additionally, the states argue that the estimates violate the Mineral Leasing Act (MLA) and the Outer Continental Shelf Lands Act (OCSLA) because considering the social cost of GHGs could impede drilling on public lands and the statutes are supposed to “promote…development of,” “obtain…financial returns on,” and “provide incentives” for new oil and gas drilling.[40]
In response to both arguments, the Biden administration argues that EO 13990 directs agencies not to apply the estimates if they were to conflict with a statute.[41] Judge Cain’s opinion agreed with the states without detailed analysis, but the states are likely to continue raising these types of arguments if these cases proceed to the merits stage.
Next steps
Even with the Supreme Court’s decision to deny the application, this litigation remains important for the Biden administration’s upcoming climate policies. As Louisiana v. Biden continues to move forward in the Fifth Circuit, we will update our tracker page with the latest filings and any opinions. We will also listen to the oral arguments in Missouri v. Biden this June and will update our legal analyses and trackers once the Biden administration releases its updated estimates.
[1] The plaintiffs in Louisiana v. Biden are Louisiana, Alabama, Florida, Georgia, Kentucky, Mississippi, South Dakota, Texas, West Virginia, and Wyoming. No. 2:21-cv-01074 (W.D. La.). The plaintiffs in Missouri v. Biden are Missouri, Arizona, Arkansas, Indiana, Kansas, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Tennessee, Utah, and Alaska. No. 4:21-cv-00287 (E.D. Mo.).
[2] Order Granting Prelim. Inj., Louisiana v. Biden, No. 2:21-cv-01074 (W.D. La. Feb. 11, 2022). In the other lawsuit, the court dismissed the case as discussed below. Missouri v. Biden, No. 4:21-cv-00287 at 15, 43 (E.D. Mo. 2021).
[3] Order Granting Stay, Louisiana v. Biden, No. 22-30087 (5th Cir. Mar. 16, 2022)(per curiam).
[4] Exhibit 1, Declaration of Dominic J. Mancini in Support of Def’s Mot. To Stay at 10, Louisiana v. Biden, No. 2:21-cv-01074 (Feb. 19, 2022).
[5] The government’s brief to the Supreme Court indicates that this type of oversight has occurred since the Nixon administration, Response in Opp’n to Application to Vacate at 1, Louisiana v. Biden, No. 21A658 (May 9, 2022).
[6] IWG; Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (Feb. 2010), https://www.epa.gov/sites/default/files/2016-12/documents/scc_tsd_2010.pdf.
[7] A discount rate accounts for the change in the value of money over time. Where a higher discount rate is used, money evaluated in the present is assigned a lower value compared to the future. See Corporate Finance Institute, What is a Discount Rate?, https://corporatefinanceinstitute.com/resources/knowledge/finance/discount-rate/ (last visited Apr. 1, 2022).
[8] See, e.g., EPA, Repeal of the Clean Power Plan; Emission Guidelines for Greenhouse Gas Emissions From Existing Electric Utility Generating Units; Revisions to Emission Guidelines Implementing Regulations, 84 Fed. Reg. 32,520 (Sep. 6, 2019).
[9] EPA, Request for Nominations of Experts for the Review of Technical Support Document for the Social Cost of Greenhouse Gases, 87 Fed. Reg. 3,801, 3,802 (Jan. 25, 2022).
[10] Missouri v. Biden, No. 4:21-cv-00287 at 15, 43 (E.D. Mo. 2021).
[11] See May 16 Notice from clerk’s office, Missouri v. Biden, No. 21-03013 (8th Cir. 2021).
[12] The five statutes are the Energy Policy Conservation Act (EPCA), the Clean Air Act (CAA), the National Environmental Policy Act (NEPA) Mineral Leasing Act (MLA), and the Outer Continental Shelf Lands Act (OCSLA).
[13] The federal government also argues against these points. For example, the government argues that interim estimates direct agencies using the estimates to take comments on their use of the estimates. Response, in Opp’n to Application to Vacate at 11, Louisiana v. Biden, No. 21A658 (May 9, 2022). Moreover, some of these claims may already be moot. See OMB, Notice of Availability and Request for Comment on “Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990”, 86 Fed. Reg. 24,669 (May 7, 2021). However, the IWG will release the final estimates following notice and comment and a peer review process, so if any procedural deficiencies were present, they could be cleared. Thus, our analysis does not address these complaints.
[14] Order Granting Stay, Louisiana v. Biden, No. 22-30087 at *5 (5th Cir. Mar. 16, 2022).
[15] Brief for Appellants at 44, Louisiana v. Biden, No. 22-30087 (5th Cir. 2022).
[16] micus Brief for New York, Colorado, Delaware, Illinois, Maryland, Michigan, New Jersey, Oregon, Vermont, Washington, Wisconsin, and Massachusetts, Louisiana v. Biden, No. 22-30087 (May 10, 2022).
[17] U.S. Const. art. III, § 2.
[18] The doctrine of justiciability comes from Article III of the US Constitution, which only allows courts to hear cases and controversies. As one part of this doctrine, plaintiffs must be able to show that they have standing to bring the case. In the Missouri case, the court discussed other elements of justiciability: ripeness and mootness. Missouri v. Joseph Biden, No. 4:21-cv-00287 at *10 (E.D. Mo.. 2021).
[19] Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
[20] Spokeo, Inc. v. Robins, 578 U.S. 330, 332 (2016), as revised (May 24, 2016)(quoting Lujan). For an injury to be concrete, “it must actually exist” in reality, rather than in the abstract. Id. at 340. “For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a personal and individual way.’” For an injury to be imminent, it must be “certainly impending…’allegations of future injury’ are not sufficient.” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 409 (2013). It does not have to be “literally certain,” that the harm will occur, so long as there is “substantial risk” the harm will occur. Id. at 414 n.5.
[21] Emergency Mot. for Stay Pending Appeal Under Circuit Rule 27.3 at 12, 14, Louisiana v. Biden, No. 2:21-cv-01074 (Mar. 1, 2022); Defs.’ Mem. in Support of Mot. To Dismiss, passim, Missouri v. Biden, No. 4:21-cv-00287 (June 4, 2021). The Eastern District of Missouri also relied on this case in its standing analysis.
[22] Defs.’ Mem. in Support of Mot. To Dismiss at 17, Missouri v. Biden, No. 4:21-cv-00287 (June 4, 2021)
[23]Id. Judge Cain acknowledges the federal government’s argument that there are no NAAQS for GHGs, but does not resolve the argument. The cost-benefit analysis for the federal implementation plan cited does use the interim social cost estimates. 86 Fed. Reg. 23,054, 23,153 (Apr. 30, 2021).
[24] The Trump administration’s proposal used discount rates of 3 and 7 percent and only accounted for domestic damages. These are the same metrics that Judge Cain ordered the Biden administration to adopt.
[25] Instead, the federal government argues that they conducted a cost-benefit analysis because the analysis was required by EO 12866. See Brief for Appellants at 44, Louisiana v. Biden, No. 22-30087 (5th Cir. 2022).
[26] California v. Texas, 141 S. Ct. 2104, 2113 (2021). The Supreme Court has held that an action is fairly traceable to the injury when courts predict that it will make a third party act in a way that causes injury for the plaintiffs. Dep’t of Com. v. New York, 139 S. Ct. 2551, 2566 (2019). In other words, if the EO was certain to cause agencies to injure the states, the EO could meet the predictable effect test.
[27] Emergency Mot. for Stay Pending Appeal Under Circuit Rule 27.3 at 14, Louisiana v. Biden, No. 2:21-cv-01074 (Mar. 1, 2022).
[28] Mem. Ruling, Louisiana v. Biden, No. 2:21-cv-01074 at *21 (W.D. La. Feb. 11, 2022). On the APA, Judge Cain also found that the states were deprived the chance to submit comments and that the cost measure increases regulatory burdens and harms citizens’ economic well-being.
[29] Missouri v. Joseph Biden, No. 4:21-cv-00287 at *19 (E.D. Mo.. 2021); see also Order Granting Stay, Louisiana v. Biden, No. 22-30087 at *5 (5th Cir. Mar. 16, 2022)(per curiam).
[30] Lujan, 504 U.S. at 561.
[31] Emergency Mot. for Stay Pending Appeal Under Circuit Rule 27.3 at 16, Louisiana v. Biden, No. 2:21-cv-01074 (Mar. 1, 2022).
[32] Mem. Ruling, Louisiana v. Biden, No. 2:21-cv-01074 at *22 (W.D. La. Feb. 11, 2022). The states would likely counter that they are harmed by the requirement that agencies use the interim estimates in their cost-benefit analysis and therefore removing that requirement would alleviate their harm. In other words, they may argue that there is a big difference between requiring agencies to use the interim estimates and merely allowing them to consider GHG emissions as one of the factors in their decision. This argument, however, is still too speculative in nature to succeed on standing.
[33] Missouri v. Joseph Biden, No. 4:21-cv-00287 at *19 (E.D. Mo.. 2021); see also Order Granting Stay, Louisiana v. Biden, No. 22-30087 at *5 (5th Cir. Mar. 16, 2022)(per curiam).
[34] Complaint, Missouri v. Biden, 4:21-cv-00287 (E.D. Mo. Mar. 8, 2021). Because this case was dismissed on standing, no court reached this case on the merits.
[35] Util. Air Regulatory Grp. v. E.P.A., 573 U.S. at 302, 324 (2014).
[36] Response in Opp’n to Application to Vacate at 28, Louisiana v. Biden, No. 21A658 (May 9, 2022).
[37] The government presents additional arguments against the application of the Major Questions doctrine in this instance. For example, the government argues that it is inconsistent to argue that the cost-benefit analyses required by EO 12866 and Circular A-4 do not present major questions but that the ones required by EO 13990 do.
[38] Complaint, Louisiana v. Biden, No. 2:21-cv-01074 at *28 (W.D. La. Feb. 11, 2022).
[39] The federal government does not raise the many statutory interpretation arguments that this is not a proper reading of the text of the Clean Air Act.
[40] Mot. For Prelim. Inj. at 34-35, Louisiana v. Biden, No. 2:21-cv-01074 (W.D. La. July 29, 2021). On these provisions, too, the federal government does not dive into the statutory interpretation reasons that this interpretation is wrong. See also Response in Opp’n to Application to Vacate at 10, Louisiana v. Biden, No. 21A658 (May 9, 2022).
[41] See Defs.’ Opp’n to the Pls.’ Mot. for Prelim. Inj. at 45, Louisiana v. Biden, No. 2:21-cv-01074 (W.D. La. Sep. 1, 2021).