A federal appeals court upheld the Biden administration's decision to reinstate an Obama-era social cost of greenhouse gases estimate that federal agencies can consider when developing new policies.
The April 5 ruling by three judges with the US Court of Appeals for the 5th Circuit found the 10 largely Republican-led states that challenged the cost metric had no standing because the harm that they alleged was speculative.
As a result, the court vacated a lower court's preliminary injunction, which the 5th Circuit had previously stayed, prohibiting federal agencies from using the cost calculation in their regulatory analyses.
Before proposing significant action, federal agencies have to assess the cost and benefits of any new regulation. Federal agencies for many years had included the costs of greenhouse gas emissions in that analysis in their own ways, but the Obama administration formed an interagency working group to standardize those cost estimates.
The National Academies of Science published a report in January 2017 reflecting the working group's findings. The Trump administration disbanded the group two months later, deeming its work "no longer representative of government policy." As a result, agencies reverted to making their own individualized cost estimates.
President Joe Biden later issued an executive order reconvening the working group. That group published an interim estimate, reflecting the prior working group's 2016 findings, of $51 per metric ton of carbon with a 3% discount rate used during the Obama years.
The 10 Republican states sued in April 2021 and asked a Louisiana district court for a preliminary injunction barring federal agencies from using the Biden cost metric. The lower court granted that request, but the 5th Circuit in March 2022 stayed the preliminary injunction pending a decision on the merits of the case. The states then filed an emergency application with the Supreme Court, which the high court rejected in May 2022.
The 5th Circuit's ruling
The 5th Circuit has now dismissed the lawsuit altogether and vacated the lower court's preliminary injunction. In doing so, it rejected the 10 states' allegations that their energy industries and chemical manufacturing sector are suffering from the use of the Biden cost metric in "job-killing regulations."
"Plaintiffs' allegations of 'injury in fact' rely on a chain of hypotheticals: federal agencies may (or may not) premise their actions on the interim estimates in a manner that may (or may not) burden the states," wrote Judge Jacques Wiener, who penned the court's decision. "It is well accepted that the mere 'possibility of regulation' fails to satisfy injury in fact."
The judge also noted that federal agencies take into consideration public comments on proposed rules to ensure the social cost of carbon is not arbitrary or capricious as the states alleged.
The three-judge panel went on to reject the plaintiffs' argument that the climate cost metric will force states to change their own policies, admonishing the states for contemplating injuries that are "several steps removed" from the Biden administration's decisions.
"The states cannot do away with their alleged parade of horribles in a single swipe at the duly elected executive," Wiener wrote.
The 10 states — Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, South Dakota, Texas, West Virginia and Wyoming — have the option to ask the entire 5th Circuit to review the three judges' ruling.
"I suspect there is a decent chance that the median judge on the circuit would not be so friendly to the administration, in which case en banc reversal might be possible," Daniel Walters, a professor at Texas A&M University's School of Law, wrote in an email. "But on the other hand, the law here is super clear. Challenges to Trump's regulatory executive orders were generally dismissed on standing grounds because the agencies had yet to act on the executive orders, and the same should be true here."
The decision comes as the US Environmental Protection Agency is proposing to update the US cost of carbon estimate to as high as $190 per metric ton, roughly the same as what other countries use today.
Joining Wiener in the opinion in Louisiana v. Biden (No. 22-30087) were Judges Stephen Higginson and Cory Wilson.
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