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Biden Climate Rules Move Ahead Amid Wait for Final Carbon Metric

Nov. 10, 2022, 10:30 AM

The Biden administration is forging ahead with federal regulations using a temporary figure to account for the costs of climate change, as a delay in finalizing a permanent estimate draws frustration from industry and advocates.

The use of estimates to measure the broad costs imposed by carbon dioxide and other greenhouse gases was launched by the Obama administration and revived by President Joe Biden, who set an interim $51 per ton number while the administration finalizes a new metric.

The carbon cost figure is touted as a way to more fully account for the benefits of regulations that cut emissions, including renewable fuel, methane, and tailpipe rules, as well as efficiency standards for appliances like microwave ovens, clothes dryers, and home furnaces.

But without a permanent number, what was originally intended as a temporary fix is increasingly being used to guide an array of energy, air pollution, and other rulemakings the administration is moving through the pipeline. Industry groups say the result is too much business uncertainty. Environmental groups say the temporary figure lowballs climate costs and blocks more aggressive action.

The Biden administration planned to role out a final metric in January 2022. And while an interagency working group has been working on final estimates since releasing the interim numbers in February 2021, the White House said this week it still couldn’t say when the carbon cost would be finalized.

“This administration remains committed to accounting for the costs of greenhouse gas emissions as accurately as possible, and we continue to assess how best to account for these costs in regulatory and budgetary contexts in the future,” a White House Office of Management and Budget spokesman said.

‘A Lot of Uncertainty’

Industry groups say the White House panel tapped to develop the final estimates has become a “black hole"—a worrying lack of transparency given potentially costly regulations are moving forward.

“Especially during this time of tight labor markets, high energy prices, and lot of uncertainty, it’s helpful when companies are doing their business planning years out into the future to know what regulations are coming and what their compliance obligations will be,” said Chad Whiteman, US Chamber of Commerce vice president for environment and regulatory affairs.

“There is a lot of uncertainty here, not just with what the final numbers may be but also how agencies may apply it in decisionmaking,” he said.

The metric estimates societal costs for each ton of planet-warming greenhouse gases emitted, based on avoiding impacts such as lost agricultural productivity, property damages from strong storms, and diminished fresh water availability.

The White House has also used the estimate to tout benefits of the new climate law (Public Law 117-169). The OMB used the metric to calculate the law’s cumulative climate-related benefits to be as high as $1.9 trillion through 2050.

Still, climate advocates argue the $51 per ton placeholder low-balls climate costs and hamstrings agencies from pursuing more ambitious regulations to combat the climate crisis.

Work toward a final number is occurring against an intense legal backdrop, with the courts this year weighing, but for now not blocking, industry-backed attempts to kill use of the interim estimate.

A Missouri federal judge on Oct. 21 knocked down the last major legal challenge against using the interim estimate, ruling that harm couldn’t be established given there’s no final number. The US Court of Appeals for the Fifth Circuit tossed a similar challenge to the metric led by Louisiana Attorney General Jeff Landry earlier this year.

Rollback a GOP Priority

Judicial challenge of the metric, if successful, could open the door to challenging regulations that used the estimates and possibly force the Biden administration to reconsider key pending climate actions.

Those actions include 2023 model year vehicle efficiency standards, where the interim carbon cost estimate was part of the rule’s broader cost-benefit analysis. Republican-led states have targeted the metric’s use in litigation against the tailpipe emission standards.

The interim figure was also used in stronger vehicle fuel economy standards issued in April. The Transportation Department cited a range of benefits, from roughly $73 billion to $112 billion by 2050. The Environmental Protection Agency’s renewable fuel mandate touted climate benefits of between $3 billion and $51 billion using the metric in its July revision, and the Department of Energy’s revised consumer furnace standard tallied $16.2 billion in climate benefits using the interim figure.

Top congressional Republicans have pressed the administration to disclose where it has used the interim number, including whether the EPA has used the metric in reviewing draft environmental impact statements prepared by sister agencies to ensure energy and other projects needing federal approval have fully addressed environmental impacts.

Sen. Shelley Moore Capito (R-W.Va.) and Rep. Cathy McMorris Rodgers (R-Wash.)—top Republicans on the Senate Environment and Public Works and House Energy and Commerce committees, respectively—in a March letter demanded EPA Administrator Michael Regan fully disclose “any assessments, reviews, regulatory activity, briefing materials, and litigation” where the interim figure was used.

Both lawmakers could be poised to take their committees’ gavels in the next Congress, though control of the House and Senate are still in the balance following Tuesday’s midterm elections.

Capito has repeatedly targeted the carbon cost metric, including in legislation (S. 4596) she introduced in July with Sen. James Lankford (R-Okla.) that has nearly a dozen GOP cosponsors. The bill is designed to bar use of the metric in the rulemaking process. Capito in a Nov. 4 statement said she would use “all available tools” to roll back the social cost of carbon effort.

“On multiple occasions, I have directly asked the Biden administration for insight into the development and use of its flawed social cost of carbon, and those inquiries were consistently ignored. It’s unacceptable,” she said.

Metric in Motion

The metric’s impact on final regulations can be hard to decipher given it’s just one of many benefits attached to a regulation that can be weighed against economic costs that regulation would impose.

It’s “not at all clear that there’s a direct line from the social cost of carbon to the level at which a standard is ultimately set,” said Amy Sinden, a professor at Temple University’s Beasley School of Law.

Any final carbon cost number that comes in above the temporary estimate is likely to further anger industry groups and trigger resistance from Republican opponents.

But the delay also likely stems from the challenge of setting calculations that are a complex blend of scientific and economic modeling, which the White House knows must withstand scrutiny and a likely legal challenge, said Hunter Johnston, a partner at Steptoe & Johnson LLP.

“These things have to be carefully done, or else they’re easily reversed,” Johnston said. “You have to go through a very disciplined process because you want it to be scientifically and economically justified.”

Those backing social carbon cost estimates note its use dates to the Obama administration and that even the Trump administration used the metric, though it slashed the estimate to as little as $1 per ton. It’s “clear” that the cost of carbon emissions isn’t zero, according to University of California Berkeley law professor Dan Farber.

“If you leave it out of the cost-benefit analysis, you’re skewing the analysis, just like ignoring any other cost or benefit of the action,” Farber said. “Several agencies have been reversed for ignoring the climate impacts of their action, and the SCC is the easiest way to incorporate that.”

Too Weak?

But others argue that Biden’s interim number significantly hampers agencies from setting regulations by underestimating the costs imposed on society by carbon emissions.

Resources for the Future concluded in September after a multiyear study that the $51 a ton cost should be more than three and a half times higher at $185 per ton—drawing on recent scientific and economic literature showing earlier estimates vastly underestimate the harm of each additional ton of carbon dioxide released into the atmosphere.

Whether agencies’ continued use of the $51 per ton figure is driving up regulatory costs is in the eye of the beholder.

Some note that the the bulk of the big climate rules underway have yet to be proposed, including plans to revise power plant carbon limits in the wake of the West Virginia v. EPA decision.

And the rulemakings moving ahead thus far have been “relatively minor,” according to Brian Prest, director of RFF’s Social Cost of Carbon Initiative.

“Maybe they’re considered large impacts to the affected industries, and so they’re going to raise a ruckus about it,” said Prest, who noted that only revised tailpipe emission standards would be considered a significant regulation.

To contact the reporters on this story: Dean Scott in Washington at dscott@bloombergindustry.com; Jennifer Hijazi in Washington at jhijazi@bloombergindustry.com; Stephen Lee in Washington at stephenlee@bloombergindustry.com

To contact the editors responsible for this story: Zachary Sherwood at zsherwood@bloombergindustry.com; Renee Schoof at rschoof@bloombergindustry.com