02.11.2022

Judge Orders Administration to Cease Using the Social Cost of Carbon

Dr. Patrick Michaels February 11, 2022

Today, in a sweeping ruling from the Western District of Louisiana, Judge James D. Cain, Jr. ruled that the Biden administration must shelve its version of the “social cost of carbon” (SCC) for any regulatory action.

Judge Cain’s ruling echoes much of what we have written in recent years—that  the administration is bound to follow the guidelines from the Office of Management and Budget (OMB) Circular A-4, published in 2003. With regard to the cost of regulations, Circular A-4 states:

Your analysis should focus on benefits and costs that accrue to citizens and residents of the United States. Where you choose to evaluate a regulation [such as one based on the SCC] that is likely to have effects beyond the borders of the United States, these effects should be reported separately.

The Biden administration paid no heed to what OMB said. It reports only a global SCC, because the SCC in the U.S. is de minimis. Economically developed societies easily adapt to modest changes in temperature or significant weather events. But mere secular and daily weather events can impose relatively large costs on poor countries.

OMB also states that “a real discount rate of 7 percent” should be used when determining the future cost of regulations, and for perspective, “you should provide estimates using both 3 percent and 7 percent.” The latter figure is the rather robust rate of return on stock investments over the last 125 years.

But the administration refuses to use 7 percent, because under reasonable future climate assumptions, that drives the SCC into negative territory. In other words, the SCC becomes the Social Benefits of Carbon.

Judge Cain’s ruling:

  • Orders “[d]efendants [the administration] to return to the guidance of Circular A-4 in conducting regulatory analysis;”
  • Enjoins the administration from “[a]dopting, employing, treating as binding, or relying upon any Social Cost of Greenhouse Gas estimates based on global effects or that otherwise fails to comply with applicable law” [Emphasis added]; and
  • Enjoins the administration from “[a]dopting, employing, treating as binding, or relying upon any estimate of the Social Cost of Greenhouse Gases that does not utilize discount rates of 3 and 7 percent or that otherwise does not comply with Circular A-4.

The legal rumor mill has it that this will be held up on appeal in the Fifth Circuit and there is a strong possibility it could reach the Supreme Court. Given the Court’s history on sweeping regulation without legislative authority, it is likely to uphold Cain’s ruling.

This is the biggest ruling ever against the global warming alarmism that has been thriving in Washington for decades. And don’t forget that on February 28, the Court is going to hear arguments to determine whether its 2007 Massachusetts v. EPA ruling, which initially detonated the bonfire of carbon dioxide regulations, will stand.

Patrick J. Michaels is a senior fellow in the Center for Energy and Environment at the Competitive Enterprise Institute. He is also a senior fellow with the CO2 Coalition in Arlington, VA.

Previously, he was a research professor of Environmental Sciences at University of Virginia for 30 years, and Virginia State Climatologist for 27 years. He was President of the American Association of State Climatologists and program chair for the Committee on Applied Climatology of the American Meteorological Society, and Director of the Center for the Study of Science at the Cato Institute.

This commentary was first published 2/11/22 at Competitive Enterprise Institute

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