What is the ‘social cost of carbon,’ and why is AG Landry urging the Supreme Court to stop it?

Louisiana is at the center of a lawsuit against the Biden administration over how much planet-warming emissions cost society.

Joined by nine other Republican-led states, Louisiana Attorney General Jeff Landry is leading a challenge against increasing the estimate of damage caused by greenhouse gas emissions amid speculation that he plans to run for governor.

Last year, President Joe Biden re-established an Obama-era group called the Interagency Working Group on the Social Cost of Carbon that had been disbanded under the Trump administration. Under President Donald Trump, officials viewed the cost of climate pollution as negligible.

With the return of the working group, that cost rose to levels estimated under the Obama administration with plans to analyze whether an even higher figure would more appropriately account for the impact of climate change as some research suggests.
But Landry and other attorneys general argue the move is a “unilateral and arbitrary attack” on state rights, potentially harming the local economy by unduly increasing regulatory burdens on Louisiana’s fossil fuel, chemical and fertilizer industries.

It’s a case that could go before the Supreme Court if Landry has his way, after the Fifth Circuit Court of Appeals recently denied the states’ request for an injunction, allowing the Biden administration to use its estimate for the time being. A Louisiana District Court judge had ruled in favor of halting the administration’s use of a higher metric, but the appeals court disagreed about a month later.

In their unanimous decision, the three circuit court judges called the states’ concerns over immediate harm “merely hypothetical.”

What is the social cost of carbon?

At the crux of the legal battle sits a little-known, wonky economics concept that plays a critical role in balancing the generational impact of climate change in federal policy and regulations.

The social cost of greenhouse gasses assigns dollar figures to the long-term damage caused by the emission of three contributors to global warming: carbon dioxide, methane and nitrous oxide.

“It’s the cost that we impose on society by emitting one additional ton of carbon dioxide into the atmosphere,” said Greg Upton, an associate research professor at Louisiana State University’s Center for Energy Studies. “And that cost on society is the cost not only on today’s society but also future generations.”

The federal government first started using the metric under the Bush administration after a court ruled that officials failed to adequately consider the damages posed by climate change in a new fuel economy standard. The Obama administration then looked to standardize the tool and improve models for calculations by creating an Interagency Working Group to figure out how much the emissions cost people.

Between Obama, Trump and Biden, those figures have fluctuated widely. For carbon dioxide, it went from $46 per ton to about $1, and it’s now temporarily sitting at about $51 per ton as the revived working group continues to draft new numbers.

Methane and nitrous oxide — two of the most potent greenhouse gasses — are assigned even higher costs. Though more carbon dioxide is emitted worldwide, when compared pound for pound, these two gasses trap more heat. The 2020 value for each ton of methane equaled $1,500, and for nitrous oxide, it’s $18,000.

The calculation hinges on two factors: how much harm warming the planet causes, and how much the lives of future generations are worth. Under the Trump administration, the answer to both those questions was not much, but some researchers argue that even the Biden and Obama administration’s totals greatly underestimate the cost of the gas.

One 2020 study published in the journal Nature Climate Change argued the range should fall between $100 and $200 per ton of carbon dioxide.

The metric, Upton said, can be used to price carbon through tools like a carbon tax to force the market to take the social cost into account.

But Upton noted the value placed on carbon emissions remains an ongoing discussion in the academic community considering the uncertainty around the effect of climate change.

“There’s an enormous amount of knowledge out there that humans have yet to gain, and as we gain more knowledge, we’ll be more effective at estimating that social cost of carbon,” he said.

What’s at stake in Louisiana

Louisiana is among the states with the most to lose as climate change worsens, yet its oil and gas legacy also leaves the economy vulnerable as federal regulators look at ways to cut fossil fuels.

Landry’s lawsuit calls the social cost of greenhouse gasses “made-up,” “arbitrary” and crafted “out of whole cloth.”

And in hisappeal to Supreme Court Justice Samuel Alito filed on April 27, he argued that the federal government’s consideration of the cost of greenhouse gas emissions amounts to overreach. He said using the metric could hurt the state’s economy, coastal restoration efforts and unfairly inject the administration into the daily lives of residents.

“The government can justify killing cows (because they emit methane), pipeline projects (because pipeline-related projects might contribute to downstream consumption of oil or gas), road projects (because concrete and traffic contribute to GHGs), … and so on,” stated Landry’s Supreme Court application.

Landry cited concerns over how the figure is used in deciding regulatory actions when conducting cost-benefit analyses, potentially affecting energy projects by weighing the climate costs.

He believes the value should return to Trump-era levels when the scope of the cost was limited based on climate impacts experienced solely within the United States and severely discounted the value of people in future generations.

But Andres Restrepo, a senior attorney with Sierra Club, called Landry’s arguments flawed, noting that in 2016, the 7th Circuit Court of Appeals already upheldthe use of the social cost of carbon within the Department of Energy’s rulemaking. Not accounting for climate pollution’s cost could hamstring broader efforts to limit global warming, he said.

“If you have a policy in place that dramatically undercounts what those costs are of greenhouse gasses and what the benefits of cutting greenhouse gasses are, you’re going to end up with a wildly distorted landscape that will not allow us to do what we need to do at the federal level to actually tackle the climate crisis,” Restrepo said.

Currently, the court battle is centered on the states’ push for an injunction. If the Supreme Court accepted Landry’s appeal, it would weigh in on whether the government can use its calculations while the lawsuit plays out. Once decided, the district court will consider the case’s outcome.

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