Presidential Precedent and the Cost of Carbon

A plume of emissions billowing from a smokestack, with dollar bills overlaid.

By Bethany A. Davis Noll
March 25, 2021

Bucking its reputation as “the most important number you’ve never heard of,” the social cost of greenhouse gases has generated quite a buzz in recent weeks. The Biden administration’s actions on this front triggered a new lawsuit from conservative attorneys general, providing a useful chance to highlight this little-known tool and the court cases that have developed around it.
Executive Order No. 13990 announces that the Biden administration will “listen to the science.” To that end, the order establishes a new Interagency Working Group on the Social Cost of Greenhouse Gases and rescinds the Trump-era estimates. The social cost of greenhouse gases is an estimate of the impacts associated with each additional ton of greenhouse gas emissions, such as the damage caused by increasingly severe hurricanes, wildfires, and heat waves. It can be used to analyze the monetary damages of even small-scale projects that will increase or decrease those emissions.
The new Interagency Working Group has now directed agencies to use estimates based on those developed under the Obama administration, adjusted for inflation. By next year, the numbers will undergo a comprehensive review and be further updated. Any time an agency uses the new estimates to assess the impacts of a new regulation, the new rule will be subject to the same notice and comment requirements that ensure transparency and public input in any federal rulemaking. And under President Obama, agencies published numerous rules using the numbers — an approach that was upheld in court.
The new lawsuit alleges that the Biden administration’s executive order violates the Constitution because no statute authorizes the executive to provide this type of direction to agencies. But presidents have long used executive orders to provide guidance in this way, to facilitate coordination and ensure consistency across federal agencies. The Trump administration used these powers to set agency priorities before political leadership was in place at agencies, to instruct agencies to repeal two regulations for every one regulation that they issued, and to review and potentially rescind regulations that it asserted burdened domestic energy production, among other actions. The trend dates at least back to President Reagan’s use of an executive order instructing agencies to maximize “net benefits to society.”
And absent the Interagency Working Group’s numbers, agencies face some jeopardy in court. In a 2008 case about fuel economy standards, a federal appeals court held that the Transportation Department’s decision to place zero monetary value on greenhouse gas emissions was arbitrary and capricious. When an agency values the benefits of an action, it is generally required to also value the harms of the action — and the social cost of greenhouse gases allows an agency to do just that. Conversely, relying on unvetted estimates for the social cost of greenhouse gases proved treacherous for the Trump administration. In 2020, a court vacated the Interior Department’s repeal of the Waste Prevention Rule, a rule meant to curb leaks at oil and gas facilities on public lands, after holding that the agency had ignored the best available science when it used that administration’s indefensibly low estimates for the social cost of methane, a highly potent and damaging greenhouse gas.

When agencies face legal risk in the absence of a consistent and clear analytical tool to value the social cost of greenhouse gases, it is reasonable to expect that a president will provide them with guidance on how to value those damages. And the executive order itself makes clear that it should be administered “in a manner consistent with applicable law” — just like President Trump’s executive orders before it did, and those of his Republican and Democratic predecessors.

Bethany A. Davis Noll is an expert in administrative and environmental law and an experienced litigator. She is Executive Director of the State Energy & Environmental Impact Center.