A federal court in Louisiana heard oral argument Dec. 7 in a case brought by Louisiana Attorney General Jeff Landry (R) that is gaining national attention. The case seeks to prevent federal agencies from considering scientific estimates of climate change impacts. It could have profound consequences, but not the ones Landry suggests.
Landry has portrayed the issue as an urgent matter of constitutional significance, and a recent request for additional briefing suggests the court is entertaining those assertions. However, this is actually a somewhat routine matter of administrative law that is unripe for review. Landry’s blatant mischaracterizations highlight the frailty of his case.
In a heated press conference, Landry called the social cost of carbon metric (which estimates the economic impacts from carbon dioxide emissions) “voodoo economics” and suggested that his lawsuit is necessary to prevent the government from imposing a hypothetical tax on items like meat. Landry decried executive overreach and equated the metric with a “takeover of all the industries in this country.”
Reality or Rhetoric
But reality does not match Landry’s rhetoric.
In truth, the social cost of carbon is a scientific assessment that agencies have relied on for a dozen years to assess proposed policies—and not a substantive policy itself. Use of the tool is well-grounded in long-standing and bipartisan principles of administrative law and is required by federal courts.
Barring its use would not protect Americans from an urgent threat, but instead complicate the government’s efforts to assess the impacts of policy choices.
Under executive orders initiated by President Reagan 40 years ago, federal agencies conduct cost-benefit analysis when considering significant regulations such as pollution controls. By monetizing and comparing regulatory impacts, like compliance costs and health improvements, agencies determine whether a rule’s benefits justify the costs.
The U.S. Supreme Court has underscored the need for agencies to weigh regulatory effects. Writing for the court in 2015, Justice Antonin Scalia explained that “reasonable regulation ordinarily requires paying attention to the advantages and the disadvantages” and that “no regulation is appropriate if it does significantly more harm than good.”
A Tool to Measure Climate Effects
The social cost of carbon—a valuation of incremental climate damages based on decades of independent economic research—facilitates this type of cost-benefit comparison.
Economic models of climate damages were first developed in the 1990s. Owing to their availability, a federal appeals court ruled in 2008 that agencies must monetize climate impacts in cost-benefit analysis. Ignoring this metric, the Ninth Circuit explained, essentially and improperly assigns zero value to climate impacts.
Following this decision, agencies under the George W. Bush administration began applying the social cost of carbon. To harmonize those valuations, the federal government convened a working group with members of twelve federal agencies, which first recommended climate-damage valuations in 2010 based on leading independent models. The group twice updated these valuations to reflect scientific advancements.
In 2016, the Seventh Circuit ruled that the Department of Energy’s use of these valuations in regulatory analysis was scientifically and legally proper. Regulated entities did not challenge the social cost of carbon’s application in dozens of other regulatory actions.
In 2017, President Trump issued an executive order disbanding the interagency working group and directing agencies to amend (but not suspend) their climate-damage valuations.
The Biden administration reconvened the interagency group, and asked it to update its valuations to reflect recent scientific and economic developments. As a first step, that group reaffirmed its prior valuations as interim estimates. It’s both those valuations and the ongoing assessment process that Louisiana challenges.
Not ‘Voodoo Economics’
Which returns us to Landry’s hyperbole.
Contrary to Landry’s claim, the social cost of carbon is hardly “voodoo economics.” It’s been developed by a wide range of mainstream economists, one of whom, William Nordhaus, received a Nobel Prize for that work. Another Nobel laureate—Kenneth Arrow, regarded among the greatest economists of the 20th century—endorsed the interagency group’s methodology.
Landry’s equation of the social cost of carbon with a tax is also false. A tax is a monetary amount that individuals or entities pay to the government. But nobody pays the social cost of carbon. It merely estimates damages from carbon dioxide emissions. And contrary to Landry’s suggestion, federal agencies are not looking to impose unconstitutional taxes on meat or other products—they are surely aware that only Congress can impose taxes.
Landry’s assertion that the social cost of carbon represents a federal “takeover” is similarly misguided. Again, the social cost metric is just an analytical input. If agencies were to misuse those valuations in setting policies, legal challenges could ensue (as evidenced by a 2018 rulemaking that a court vacated for misapplying the metric).
Landry’s claim that issuing an executive order or recommending analytical valuations reflects executive overreach is also untrue. Presidents routinely issue non-reviewable executive orders, such as President Trump’s order on the social cost of carbon. The executive also commonly suggests best practices for agency analysis.
Finally, Louisiana’s requested relief could prevent agencies from rationally assessing regulatory impacts. Courts have praised the interagency group’s valuations for facilitating an even-handed assessment of climate effects. If the Honorable James D. Cain Jr., who is hearing the case, restricts the metric’s use or further development, it could hinder this required analysis.
While Landry’s lawsuit is cloaked in hyperbole about federal takeovers and taxes, no such risks exist. But the suit does threaten to upset settled, bipartisan principles of administrative law.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
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Richard L. Revesz is the AnBryce Professor of Law and Dean Emeritus at the New York University School of Law, where he directs the Institute for Policy Integrity.
Max Sarinsky is a senior attorney at the Institute for Policy Integrity and an adjunct clinical professor at New York University School of Law.